While every investor wants to see both positive cash flow and equity appreciation when they select a real estate investment, sometimes people will sacrifice one in favor of the other. There are many neighborhoods with properties that have appreciated at rapid rates and will continue to do so because of their prime location. As a result, the cash flow will not be as high as other areas. Some people prefer this type of investment and are willing to lose a little bit of money each month so long as they are confident the property is appreciating significantly. We have seen several examples where an investment will lose as much as $500/mo but appreciate over $50,000 in a year. This is the type of example where it may make sense to purchase a property with limited cash flows.

Most people prefer positive cash flow though. After all, this is the primary reason people invest. If people were interested in negative cash flow they would invest in real estate in over-priced areas like California and New York. Generally in DFW you can expect to purchase properties with a rent ratio of 1%. A rent ratio is the % the monthly rent is of the purchase price. For example, a property that is renting for $1,000/mo with a rent ration of 1% would be priced at $100,000. If the purchase price was $91,000 you would have a rent ratio of 1.1% The rent ratio is determined by the monthly rent divided by the purchase price.