What type of property investor are you?
Buy Income OR Buy Capital Appreciation
Buying Income (for cashflow)
A cash flow property buyer focuses strictly on rental properties that will produce a monthly profit after all debt service and taxes have been paid. This kind of buyer tends to seek less expensive properties and operates strictly with the bottom line in mind.
The cash flow buyer makes every financial decision, from the type of appliance to the floor coverings, based on how it will impact what the rent covers. If a cost goes up, the monthly profit goes down. The best rental property owners in this category are those who can provide a nice, well-maintained property for tenants while never upgrading to the point where the property doesn't produce a return every month.
Buying Capital Appreciation (for resale)
Appreciation buyers (often labeled "speculators") purchase property with a plan to hold it for a number of years, even if it means having to "feed it" a little each year. By feeding it, we mean having to cover some portion of debt service or operating costs out of pocket each month.
The plan here is to allow general market appreciation to push the property's value. This type of buyer often seeks higher-end properties and single-family rentals that can produce a substantial return on resale. These buyers look for fringe markets with the potential to boom because of a new shopping center, school or other form of community infrastructure that draws more residents and business.
