Ok, as I get ready to take the plunge into personal homeownership I’ve come across a new “possible” obstacle. Appreciation. In my area, (both personal and target areas) our property values have reamined steady for quite a long time. We tend to see NO appreciation in many areas and a small (but in time significant) amount of depreciation. I’m in Buffalo, New York (I’m sure most of you have heard about the market here) so i’m not seeing much of a way around it until I get to the high valued properties out of the city. Which as i might add i cannot currently afford…

As far as for a long term holding strategy, how important is appreciation if at all? If the property cash flows, there’s equity in the property, and there’s some tax incentives. is it really that important? I personally don’t think so but maybe thats because our area hasn’t enojoyed the benefits from it for as long as i can remember. Any opinions are welcome.

Happy New Year! ;D

If it cash flows you put money in your pocket, that’s a win. If it appreciates its a nice bonus but not something you can count on to pay the bills. If you still make a nice living without a rapid appreciation you are still making a nice living. People that bet only on appreciation lose their shirts, people that bet on cashflow live to see another day. If your personal investing goals won’t work without a little bit of appreciation to help achieve them faster move into another area but by all means if you can do fine without it and still make money more power to ya.

 The reasons to invest in real estate are: leverage, appreciation, depreciation and cash flow.  If all you want to do is own a house, then you are not a real estate investor, in my opinion.  If you buy a duplex or fourplex and the thing cash flows, and you can depreciate it on your taxes, then you are an investor and you don't need to sweat appreciation.  I believe that adapting your strategy to your area is a sensible thing to do.  Some folks invest outside of their local area, and I wonder if they know enough about the supply of housing, the job market, demographics, ect.  Robert Kiyosaki's real estate strategies focus almost exclusively on cash flow.
 The only trap I see with cash flow strategies is getting too much of your money locked up in equity in the name of getting cash flow.
 Good luck, I'll bet it's cold in Buffalo right about now...

You seem to be talking about your personal residence, you pick where you want to live because of lifestyle concerns. Your residence is not a money making investment. You buy a house because you love that house. You want your kids to grow up and play in the park down the street, you want them to attend the local schools, you want to walk your dog down those streets, and sit in the back your and read on warm summer nights those are the reasons you buy a personal residence. Now an investment property is a whole different calculus. It is all about the money and returns. For your business buy the house that makes you money, for personal residence buy the house that makes you happy.

Hi, I almost got a property in buffalo in 2006 but decided on another property in central new york that had better cash flow. To me its all about the cash flow. The reason I am investing in real estate is to build a nice income through rental properties. I do not care one red cent about appreciation. If I sell a property 10 years down the road for what I bought it for today I would not be upset because I make sure they make money for me from the day I buy them. Good luck

Thanks all for the comments. I’ll try and expand a bit on my strategy to help you all get a better picture.

What i’m initially trying to do is purchase a duplex (rent one unit out/live in the other) for 70% ARV, use equity to purchase the next house, etc. etc. etc. until some time down the line I purchase MY SFH. and continue to invest. To be honest appreciation isn’t even on my radar as of yet but I wanted to know how people in other areas felt about it. Was it a necessity or just basically “if it happens it happens” sort of thing. The properties will cash flow without the appreciation, but theres next to no places within the city that are appreciating or show any signs of doing so. I guess my major concern was do most investors bank on appreciation or not? Seems not. Thanks for the insight!

Thoward… Buffalo is a tough market to calculate FMV. I was going to buy 3 properties there in Oct but backed out because of the taxes. Orginally I was told one amount for taxes but then found it to be much higher. I noticed the better areas of buffalo have a very high tax rate. There is strong cashflow there, many properties will cashflow about 200-300 per unit but find a nice clean one and make sure you get all the inspections and have a good escape clause in the contract just in case something turns out bad when doing home inspection because the houses are old and many have lead paint still.

Not to deviate from the topic of the post, but if you don’t mind me asking what other then the cash flow made you change your mind for investing in Buffalo. Hopefully some of the other investors on the board had chime in also, but I seem to hear ALOT (at least 3-4 times a day) that buffalo’s not a good place to invest. I keep seeing however deal after deal take place WITH a decent cashflow for a low price. Maybe i’m just running across the wrong investors :-[.

And Yes Funder Buffalo is freezing right now. It’s like living in an icebox…

Happy Investing!

If you live in Buffalo is it not a bad market really. Your properties there require more attention and many property mgmt co will rip you off there. Old homes equal problems along with lots of crackheads in Buffalo…choose your tennats wisely…make sure you get a rent roll report from any property you buy, if they have a lease, you want a copy of it prior to signing contract but I notice many are month to month.

Hi thoward, actually the reason was not because of the cash flow. That was in fact good. I did a lot of research on the buffalo market and I do like it. I would not listen to others that tell you its not a good market. If you know the area and are comfortable and the numbers work then its good. Just make sure you vote for a probusiness leadership in the political base up there to get some business growing. The reason I did not get the property is because we were getting into the property with no money down and were going to do what is called a refi purchase where an appraisal is done and then we would get 90% of the appraisal to use to pay the seller, our expenses, fees and a bit of cash left over. The property did not appraise well so we were not able to do the transaction. By the way it was on kensington street. I have not put off buffalo, I have a great contact up there who mainly takes care of properties in the elmwood area. I also heard south park area is good andriverside is also decent. If you can get cash flow and keep it rented then by all means go for it. Dont listen to the negatives just do your research. No one knows the future. Good luck and if you have any questions feel free to ask.

no appreciation markets are that way for a reason…20-30%(of annual rent roll) vacancy rates,10-15%(of annual rent roll) per year in rehabbing/repair costs because the house is an old junker,%10 property manager,%3-5 of the value of the cheap home in taxes annually,water,sewer,violations,mortgage,snow removal,evicitons…Should I go on?..To make matters worse most likely you call your property manager and they take days to return the calls…If you can avoid these problems and still find a good cheap investment property then by all means go for it…

I have learned that RE investing is quite the double edge sword…Buy for appreciation only and most likely you can subtract most of the above.Except you will most definitely be negative cashflow,at least in my part of NYC and the 5 boroughs…You can buy a 6 family with a rent roll of 50k a year for $700k…LOL…Or head upstate NY and get the above…Talk about a dilemma…This is the reason why I leave my money in closed end funds…


There are at least 5 ways to make money with rentals. Appreciation is only one of those ways and in my opinion, the least important. Anyone counting on appreciation is simply speculating. Markets occur in cycles. Areas that appreciate today may not appreciate in the future.

Appreciation is all about gaining equity. In my opinion, it is FAR more valuable to buy a property at a big discount and therefore get your equity up-front than to HOPE that appreciation will give you equity in the future. Would you rather have $10,000 today or hope for $10,000 tomorrow? I’ll take the money today!

Operating rental properties is all about the numbers. If you can pick up equity at closing; have positive cash flow; have the tenants pay down the mortgage for you; and depreciate the property for tax purposes; is the hope of continuing appreciation really that important? I don’t think so. I’ll take the sure money every time!

Good Luck,


That’s not true at all; actually it’s the complete opposite. Buffalo has been ranked the past few years as the absolute best place for real estate investors to invest their money in the USA. It sounds crazy doesn’t it, but it’s the truth. The Buffalo Evening News paper just did a story on it a few weeks ago if you’re up for some digging; it was in the Saturday real estate section.

What you should understand is that any REI, beginner or expert hears this. If you’re going to invest in the more urban areas be prepared to have a guy from California over bid by $20,000 on a property without ever seeing it. Just make sure you do your research for any property you buy.

I personally do work in the suburbs of Buffalo, and my jobs consist mostly of flipping properties so obviously were on a different playing field, but if you ever want to shoot me an email you’re welcome to.

well said and I completely agree. Dont listen to the negatives about an area. If you know the area and do your numbers then go for it. No one knows the future but you can do well in creating a cash flow for yours. Good luck. I too have been looking in buffalo I always have one ear to the ground.

Appreciation is just one piece of the pie but it’s a very large piece for long term holding. I was hit pretty hard back in 1986 when the tax laws changed taking away some of the tax advantages of rental property. The effect was that this lowered the value of real estate in lower priced single family homes. It was not a good year, not a bad year… just not a good one.

Hey thoward just an fyi. Fortune rated buffalo as the number 3 for highest appreciation in the northeast and #14 overall nationwide for the year 2007. Go for it… Dont listen to the doubters, if you can make the money do it! Get the cashflow you know the market.

You speak so matter of factly …Fact is there are much better areas than Buffalo in Upstate NY to invest…Much better…

Of course there is and there are better places than new york to invest also. Each must figure out what is best for him/her and what or how far they want to go… Good luck with your investing…Thoward happens to live in buffalo and is interested in investing there. There is good reason for him to do so.

I’m honestly suprised it rated so high. I’ve seen numerous appraisals within the city that state the property values in the area are depreciating. But, as you said DWJ,

Dont listen to the doubters, if you can make the money do it! Get the cashflow you know the market.

IMHO any market can work, its just a matter of “tweaking” your numbers to fit the situation. You may have to buy at a lower price then usual, or look for properties that don’t need as much rehab work, but at the end of the day your cash flow should match your desired projections or its not a deal…now if only i can convince some lenders to think the same way :-\