Is It Better to Invest for Cash Flow or Appreciation?

When investing, it’s important to think about your objective. It’s tough to answer the question “Where should I invest my money” without knowing what you hope to achieve.

Investing is a great way to save for retirement, but you can also turn investing into a lucrative side hustle. From real estate crowdfunding to angel investing, being the money behind the man, woman, or endeavor has its perks.

Before you start putting your cash to work, though, make sure you understand why you’re investing.

Is It Better to Invest for Cash Flow or Appreciation?

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While there are all types of reasons and benefits for investing, obviously the common goal is to make money. I always say that passive income beats active income any day.

What’s in It for You?

But there is a difference in opinion out there for how to best receive that passive income. Should you invest for cash flow (value that starts returning immediately) or appreciation (value that grows for the future)?

The difference between investing for cash flow and for appreciation starts — but doesn’t end — with when and how you receive the return on your investment.

What’s the Difference?

When you invest for cash flow, such as via a rental property, you might begin receiving an immediate return depending on how the numbers shake out. Cash flow is technically the difference in the amount of income and the aggregate expenses each month from an investment.

Cash Flow

When you invest for appreciation in real estate, you choose a property that you think will increase in value over time. Therefore, your money is tied up in the investment until it sells.

Appreciation

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