Defining Bellevue Rental Property Goals: Cash Flow vs. Appreciation

Why Do Goals Matter?

You might be making "some" money from a rental property, but how can you know if you're on track or making "enough" money without defining goals and tracking performance? If owning a rental property is more of a hobby for you than a long-term investment strategy, goals and metrics probably aren't a high priority. 

However, if you have future plans like retirement, purchasing a vacation home, or funding college educations for your kids, you probably have very specific financial goals to hit. A property management expert can tell you that without putting a strategy in place and evaluating ROI, you might never hit those goals or generate the revenue you need to now to retire according to your plans. 

What Happens When Goals Conflict?

To achieve "real-life goals" like an ideal retirement, real estate investors need tangible goals for their rental properties—but what happens when those property goals conflict? Do you have to settle for less than you want for your investments and financial future?

It can be difficult to achieve both high cash flow and high appreciation for rental properties. However, when defining your goals, you don't necessarily have to settle for one or the other. Finding the balance between these two metrics can be the best way to maximize returns and reach your long-term goals. 

Cash Flow vs Appreciation

In most cases, rental homes with excellent cash flow often have a slower rate of appreciation. Likewise, rental properties with better appreciation rates don't often generate an equal rate of cash flow. Where home values appreciate quickly, rental rates don't often increase as fast. What renters are willing to pay to live in your property doesn't always offset a quick rise in property values. 

For example: 

• A property you purchased for $300,000 and rents for $3,500 a month might deliver strong cash flow. However, it might have a slow expected appreciation rate of about one percent annually. 
• In contrast, a higher-end property in a different market purchased for $500,000 and rents for $3,500 will generate less cash flow every month but might have a higher appreciation rate of about 3.5% annually. With higher mortgage payments (but the same amount of rent collected each month as the lower-priced home), you have less cash flow. 

What's the better performing scenario? It depends on your goals! Some investors feel that cash is always king with a focus on "how much can I rent my house for" and minimizing expenses. Other investors prefer higher appreciation numbers that support their financial goals better than taking the time to monitor and adjust rental rates. 

What Are the Right ROI Goals?

As we've talked through different aspects of ROI and rental property investments, we hope we've communicated that there are many ways to look at returns and judge a property's performance. Whether you operate rentals based on ROI goals vs. appreciation goals, the "right" goals are the ones that meet your expectations and deliver long-term success. 

However, investors don't have to choose either cash flow or appreciation when defining goals. As we mentioned, finding the right balance between these metrics can support rental property success, no matter the changes in property values, market conditions, or competitive rental prices. 

A Property Manager Can Help

How can a property owner find the balance or define reasonable, actionable goals for their real estate investments? A Bellevue property manager can help! With the right experience, property management companies understand the market and how to operate your rentals to meet your goals. 

To maximize cash flow, property managers set the ideal rental rate and reduce expenses. They also ensure your property has quality renters who pay the rent on time while minimizing vacancy time and income loss. 

To optimize appreciation, a property management company also prioritizes the physical care of your residential property. While excellent maintenance services and well-cared-for properties are critical to consistent cash flow, maintaining investment properties helps preserve (and improve) property values to maximize appreciation.

Manage ROI Goals With a Bellevue Property Management Company

Choosing between appreciation vs. cash flow can be a losing (and frustrating) battle for your long-term financial goals. While cash flow is up, appreciation might be down. By prioritizing appreciation, your cash flow might suffer. 

Choosing one over the other can leave you without the ROI you need now to achieve your future goals. Work with our team at Real Property Associates to find the right balance between consistent cash flow and appreciation over time to manage ROI goals! Our Bellevue property management team has the experience property owners need to evaluate properties, goals, and income potential. Reach out soon to learn more about our property management services how we can help you manage ROI goals!