Cash Flow vs. Appreciation: What Should Beginners Focus on? (Rookie Reply)

Summary

Real Estate Rookie – Episode Summary

Podcast: Real Estate Rookie
Hosts: Ashley Kehr and Tony J Robinson
Date: July 24, 2026
Episode: "Cash Flow vs. Appreciation: What Should Beginners Focus on? (Rookie Reply)"

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Overview

In this episode, Ashley Kehr and Tony J Robinson answer real questions from rookie real estate investors sourced from the BiggerPockets forums. The primary theme: overcoming analysis paralysis, choosing the right market, and the classic debate—should a beginner chase cash flow or appreciation in their first investment? The conversation is approachable, practical, and full of real-life advice from investors who've been there.

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Key Discussion Points & Insights

1. When Are You “Ready” to Buy Your First Investment Property?

Tackling Analysis Paralysis and Self-Assessment
Timestamps: 00:30 – 05:38

• Logistical Preparation:

  • Tony emphasizes two main prerequisites:
    • Access to sufficient capital (down payment, reserves, setup costs)
    • Getting pre-approved for a mortgage
  • “If you can cover a down payment, holding costs, funding your reserves…that is one gate. The other gate is can you get approved for a mortgage.” (Tony, 01:19)

• Knowledge Check:

  • Tony suggests if you’re familiar with 80-90% of terms discussed on the show, you likely have enough foundational knowledge to act.
  • “If I say things like cash on cash return or reserves or principal, interest, taxes and insurance, and you’re not sure what those terms mean, well, then you’ve probably still got some foundational things you need to go knock out.” (Tony, 02:45)

• Leverage Your Experience:

  • Ashley, reflecting on her own path, says property management experience is a huge advantage.
  • “You actually have so much knowledge and experience ahead of anyone else because you’re around the day-to-day, which is a big deal.” (Ashley, 03:50)
  • Networking as a property manager helped Ashley secure her first investment loan.

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2. Choosing a Market: Analysis Paralysis and Practical Steps

Timestamps: 08:42 – 11:47

• Start with Familiarity:

  • Ashley notes her first investments were local because she didn’t know investing remotely was possible.
  • Tony started out-of-state but leveraged family as a local connection.

• Building Your Market List:

  • Combine places where you have a personal or social connection with where investors are finding success.
  • Cross-analyze these lists for overlaps and do in-depth research using tools like BiggerPockets Market Finder, BrightInvestor, and Neighborhood Scout.

• Beware of AI Limitations:

  • Ashley warns AI-sourced data can be outdated or inaccurate, so always verify with reputable local data sources.

• Don’t Overthink It:

  • Tony cautions there are "500 or 1,000 or 2,000 markets" that could work, so focus on markets that fit your goals—don’t search for a magical perfect city.
  • “There aren’t five or ten best markets for you to invest into…there are 500 or 1,000…The goal is simply to find a city that matches and meets my specific investment criteria.” (Tony, 11:47)
  • If a market aligns with your goals, stop searching and start acting.

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3. The Big Debate: Cash Flow vs. Appreciation for Rookies

Timestamps: 18:07 – 21:26

• Setting Up the Question:

  • With starter home prices diverging dramatically across the US, the hosts ask:
    If you could only prioritize one—appreciation or cash flow—what’s better for your first deal?

• Tony’s Perspective:

  • The answer depends on your personal situation.
    • High-earning, stable W2 employees? Maybe appreciation is appealing for long-term wealth.
    • Wanting to escape your job or build side income? Focus on cash flow.
  • “It really depends on where you are in your life, what are your goals, and what are you trying to accomplish through real estate?” (Tony, 19:35)

• Ashley’s Perspective: Cash Flow First

  • Ashley picks cash flow, arguing it lowers risk and teaches foundational business principles, even if it means passing on rapid appreciation.
  • “I am going with B. I am going with, go for cash flow, not appreciation as your first investment.” (Ashley, 20:23)
  • Her main regret: initially buying very cheap properties in pursuit of cash flow. She now encourages aiming just above the cheapest price point for a better balance of appreciation and rent.
  • “What I would have done differently is I would have went a little more middle of the road.” (Ashley, 21:00)

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Notable Quotes & Memorable Moments

• On Readiness:
  • “If you’re listening and you’re absorbing and most of it sounds familiar, that is typically the sign that you’ve listened enough, you’ve learned enough, and you’ve got to transition into action.” (Tony, 02:55)
• On Local Knowledge:
  • “Making that transition, just think about how you’re already a step ahead of a lot of other people who have never, ever collected rent, have never, ever seen a lease agreement…” (Ashley, 03:52)
• On Perfectionism:
  • “There never seems to be a perfect time. That’s what I like about Shopify. It makes it easy to launch something without needing to be a designer or developer.” (Ashley, ad-lib, 15:00)
• On Market Selection:
  • “If you have a market that works, by all means, go invest there. But if you…the markets that do check those boxes, that you know…if they don’t support your investment goals, then go look anywhere else.” (Tony, 13:20)
• On Cash Flow vs. Appreciation:
  • “You are learning how to run a business…if you have cash flow coming in, you can help build up your reserves.” (Ashley, 20:45)
  • “When I finally did that after several years investing, I’m getting great cash flow and great appreciation from kind of those middle of the road properties.” (Ashley, 21:10)

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Key Takeaways (for Rookies)

• If your foundational knowledge is strong and your financing is lined up, don’t let “analysis paralysis” stop you from acting.
• Use your unique experience (like property management) and connections to your advantage.
• When selecting a market, don’t hold out for mythical perfection—align with your goals and verify your data.
• Cash flow is the safer choice for most new investors; just be wary of buying too cheap.
• Real estate investing is personal. Tune your strategy to your goals, risk tolerance, and the lifestyle you ultimately want.

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Timestamps for Major Segments

• 00:30 – Overcoming “am I ready?” and analysis paralysis
• 03:33 – Property management skills as a jumpstart
• 08:42 – Picking a market: practical approaches for beginners
• 11:47 – Tony’s philosophy on narrowing the search
• 18:07 – The cash flow vs. appreciation debate: which should you pick, and why?
• 21:00 – Ashley’s biggest first-investment regret and advice for rookies

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Final Thoughts

Ashley and Tony guide listeners from hesitation to action, breaking down intimidating decisions into simple, actionable steps. Their core message is clear: there’s no waiting for perfect—start with what you know, buy for cash flow at first, and learn as you grow.

Transcript

[A]

You've read the books, you've listened to a couple hundred episodes of this show, you've run so many deals through the calculator that you see cap rates when you close your eyes and you still own zero rental properties.

[B]

Today we're pulling three real questions from the BiggerPockets forums, all from rookies stuck in that exact gap. And together they map the whole path from frozen second analysis paralysis to actually closing on your first.

[A]

This is the Real Estate Rookie podcast. I'm Ashley Kerr.

[B]

And I'm Tony J. Robinson. And with that, let's jump into today's first question. So the question says, I've been working in real estate as a property manager for quite some time, close to a decade. I want to pull the trigger and finally acquire some rentals of my own. I know enough about managing real estate. I'm just not as experienced or well practiced at deal analysis and market analysis. That's a muscle I've not really had to use much thus far. What do you recommend that I do to really train up on market and deal analysis? Another question might be in hindsight for you, when did you know you were ready? Or how would you advise someone when they're looking to get started? If you were coaching someone who was starting out, how would you as the coach know that they are ready to actually analyze and acquire their own deal? What skills should that person have? Is it just a matter of simulating, analyzing deals or is there a set of criteria a person should meet for them to quote know enough. This is a great question and partially because Ash, I think it like mimics your, your own kind of genesis as a real estate investor. But second, because I think there's a lot of rookie investors who are asking the same question of when am I ready? And I'll give my context first, just on like when am I ready? Like, how do I know if I'm ready to actually buy the deal? I think first there are logistical questions you have to answer. Do you have the capital that's necessary or at least access to the capital via partnerships, other people's money, whatever it may be. But do you have the capital that's required to actually purchase the deal? If you can cover a down payment, you know, holding costs, you know, funding your reserves, if you're doing a short term rental, midterm rental, furnishing, setting up, whatever it may be, if you're flipping, covering your holding costs, if you have the capital, that is one gate, the other gate is can you get approved for a mortgage if you have already gotten pre approved and lender says, hey, you can spend a million bucks, right? Or half, whatever it is. If you've gotten pre approved and you know that you can actually get a mortgage, that's the second gate. So logistically, those are the two big things that I would say make sure that those things actually are in place. Aside from that getting to the point of quote unquote, knowing enough, I think if, if you're listening to podcasts and you're listening to me and Ashley talk, you're listening to our guest speak, and as folks are kind of sharing their stories or talking about their strategies, you're able to kind of nod your head and say, I've heard that before. I know that. Yeah, I've seen that before. If 80 to 90% of what we're talking about, you've probably heard already on a different podcast, read a different book, or seen a different Facebook group, then there's a good chance that from a knowledge perspective, you've kind of reached that point of being able to actually jump into your first deal. But if I say things like cash on cash return or reserves or principal, interest, taxes and insurance, and you're not sure what those terms mean, well, then you've probably still got some foundational things you need to go knock out. But if you're listening and you're absorbing and most of it sounds familiar, that is typically the sign that you've listened enough, you've learned enough, and you've got to transition into action.

[A]

So I actually started out as a property manager and I had no sense of real estate investing. I didn't even know I was being hired to be a property manager. I thought I was being an assistant. So it definitely was a big transition for me and a big shift. So I saw what this investor was doing. And while you're working property management, you actually have access to so much and you already have so much knowledge and experience ahead of anyone else because you're around the day to day, which is a big deal. Like, even though you're not the investor yourself, you're actually seeing what happens, the boots on the ground the day to day. So making that transition, just think about how you're already a step ahead of a lot of other people who have never, ever collected rent, have never, ever seen a lease agreement, have never, you know, went through an eviction, have never even walked an apartment before. So start thinking about that and all of the information that you already have and how you're already one step ahead of everyone else. You know, that doesn't have that knowledge, doesn't have that insight.

[C]

One thing that was a really big

[A]

deal for me and I don't know if this would work in your capacity, but I also had a lot of resources and people in my network because of where I was working. So the first loan I ever ended up getting on a property, I got it from the bank that I worked with for the investor that I was working for when I would refinance his deals or you know, do purchase loans for his deals that he was doing. I already had that established relationship with talking to that bank from doing his deals that they already knew who I was, they already knew I was on top of things. They already knew I knew what information is done and that everything was accurate and that I knew how to manage those properties. So why wouldn't I know how to manage my own properties? So just think about how you have an advantage and use that as an opportunity to get your first deal as an investor. Okay, so say you decide you are ready. The very next thing that freezes people is one word after the break, a soon to be veteran with a VA loan and a serious case of analysis paralysis Ask how a rookie picks a market.

[D]

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[A]

Our second question comes from Silas in the Bigger Pockets forums. This question is I'm almost about to get out of the military and I'm looking forward to start house hacking with my VA loan. I I've been analyzing different markets and I think it's causing me to go into analysis paralysis. I'm very worried about getting a bad deal that I won't be able to get out of for one year. What's a good multifamily market or state for a rookie investor? Okay, great questions and serious concerns. So looking at different markets like that is one of the hardest decisions I think to make is to deciding on what market. For me it was easy. I didn't even know you could invest anywhere else. I just thought you had to live near your rentals. And that's the only ways I looked. Starting out, Tony was different. Tony went almost all the way across the country to invest but you did have your mom in that area at the time. So like you still had somewhat relation. And I think that's a great starting point of looking at markets where you have some kind of advantage, whether that be an agent, a boots on the ground person, or maybe you've lived in the area before so you have some knowledge of the market. Second thing, after you have looked at those markets and compiled your list, the next list is going to look at what do you want to get out of real estate investing, what kind of strategy do you want to do, and what kind of asset class do you want to invest in? And then go on social Media, go in BiggerPockets forums, go over and see where other people are doing the exact same thing that you want to do and pull those markets and make a list of them. And just because these markets work for these people doesn't mean they're going to work for you. This is just a starting point. Okay, then you're going to take those two lists and compare them. Are there any of those that actually, you know, overlap at all? And then you're going to narrow down your list. Okay. Then you're going to go ahead and start doing your market analysis on the ones you end up with, which ones look like good markets. So if you go to biggerpockets.com market finder, there's actually a tool on there where you can go in and you can get all the data. Also all of your AI tools, you can go ahead and get information. It really does cut down a lot on market analysis. But make sure you are fact checking and verifying. There are still really good county websites. I actually really like to use Bright Investor and I think it's Neighborhood Scout and those are two websites that have a lot of data for investors to go in and like really like hone in on a zip code, a specific neighborhood even, and telling you what the different data is for that specific area too. I definitely have noticed some errors with AI like pulling data and things like that. For markets where it's old, it's not accurate. It was pulled from like some kind of headline or report that, you know, had no data, statistics or facts actually behind it. So be very careful still when using AI, make sure you're still fact checking and pulling reputable websites for your data too.

[B]

All great points, Ash. I think the only other thing I'd add, and this is more like a strategic or maybe mindset or theoretical level, but for all the rookies that are listening, there are 20,000 cities in the United States. It is impossible to, I think uncovered all of the absolute best cities for you to invest into. Because the truth is that there, there aren't five or 10 best markets for you to invest into. There are 500 or 1,000 or 2,000 markets. That would make a lot of sense for you to invest into. So I, I don't think the goal should be how do I uncover that Goldilocks city that is the absolute best one for Tony to invest into or Ashley to invest into. The goal is simply to find a city that matches and meets my specific investment criteria. If I'm an investor who's really focused on long term appreciation, well, then I need to go make sure that I find a market that gives me the ability to, you know, a market that I can afford to buy in. This still gives me long term appreciation. If my focus is cash flow and a purchase price of, you know, 300k or less, well, then I need to go find markets that allow me to cash flow really well at a 300k price point or less. So it's your, it's your goal to become the harness or the guardrails for the type of market you invest into. And once you find one or two cities that match with your investment criteria, stop the search. Because I think that's where so many people get stuck because they find cities that work. But then like, well, what if there's another city? What if there's a better city? What if there's another city? What if there's another city and that's how you end up spinning your wheels so you can build. And again, a lot of people start with familiarity or proximity when they think about buying markets. What are cities that I know or places that I live and that's where they started and that's fine. And if those markets work, by all means, go invest there. But if you the markets that do check those boxes that you know or that you live close to, if they don't support your investment goals, then go look anywhere else. You can build that familiarity by talking to an agent that knows that market really well. You can build that familiarity by booking a trip and spending a few days out there and driving around and talking to property managers and talking to contractors, making trips out there, being friends and making relationship relationships with other investors in that market. You can build familiarity. So getting off my pedestal, the point here is, as long as the market matches and supports your investment goals, that should be the ultimate trigger or deciding factor of whether or not you invest in that specific city. All right, guys, we're take a quick break while we're gone. If you're not yet subscribed to our YouTube channel, go check us out there. You can search ealestate rookie and you guys can hang out with us on YouTube as well as on audio. We'll be right back after a quick word from our show sponsors.

[C]

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[A]

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[C]

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[D]

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[E]

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[B]

all right guys, welcome back. We're here with our final question. And our final question today says Zillow just reported a record 242 cities now have starter homes going for $1 million or more. Meanwhile, the typical starter home nationwide is still under 200k. The gap between expensive markets that appreciate and cheap markets at cash flow has never been wider, which makes right now a perfect time to settle the oldest argument in real estate. So here it is. If you were buying rental number one today and could only optimize for one thing, would you pick a the pricey appreciation market with thin or potentially negative cash flow but you're betting on long term equity and rent growth or b the affordable cash flow market, money in your pocket every month, slower appreciation and easier to sleep at night, no quote unquote. It depends allowed. Pick a side and tell me why. So, not necessarily a question from a rookie, but just one that I guess we're kind of posing to the audience. And if you're watching on YouTube, I'd love to get your takedown below as well. In the comments. I'll tell you how I would approach this if I were a new investor. If I were starting today and I had to make this decision, here are the things that I would focus on. Number one is why am I investing? If I'm a high income earning W2 employee, I generally enjoy what I do and I'm fine working there for the next 20 years, then I'm probably not super concerned with cash flow. Today I'm more So concerned about can I get the tax benefits associated with, with investing in real estate? Can I get the long term appreciation? And when I do plan to retire in 20 years, can I have a really nice, nice nest egg of properties that are close to being paid off that I can then use to kind of fund my retirement? If I'm someone who works a job where maybe I wouldn't consider myself, quote unquote, high income earning, and maybe I'm not necessarily thrilled with that job and I want to go find, you know, alternative means of income, then I'm probably focusing more so on cash flow. So I think the answer to that question really depends on where are you at in your life, what are your goals and what are you trying to accomplish through real estate? So the answer, I think, is very much specific to the individual person who's answering that question.

[A]

For me, I'm going with B. I am going with go for cash flow, not appreciation as your first investment. Even if you have a high income W2 and you can afford to cover, you know, a loss every month. I mean, I really do look at as you people put money into the stock market, they're taking money every month and it's just sitting there. It's not like you're. A lot of times you're not seeing an immediate dividend paid out to you every month. Like you're seeing like cash flow. So, like, it is very common to actually invest in something and not actually see immediate gratification of cash flow. But I personally think that you should choose option B. You should go with an affordable cash flow market money in your pocket every month. You do have slower appreciation, but you are learning how to run a business. Okay, so maybe you run the numbers inaccurately and you're negative a lot more cash flow. Maybe on day one you need a new H Vac system and now you're really negative cash flow. Okay. With all of these happening, if you have cash flow coming in, you can help build up your reserves. Again, if you had that big H Vac you needed to pay for. So I think the fact that you're learning something new, I like to have less risk. Okay? So I'm going with that option B. And I think, but one mistake I made that I would do differently is even though I did find the affordable cash flow markets, I went for really low, affordable properties. Like I went for $20,000 duplex where I could, you know, pull money off a line of credit. I could do seller financing, I could get private money for what I would have done. Differently is I would have went a little more middle of the road. So I wouldn't have went for, you know, super high appreciating really nice property, really nice neighborhood. But I definitely wouldn't have went into these cash flowing properties that saw very little appreciation except for like timing the market perfectly and selling, you know, during COVID But if I were to do it again, I would have saved more money and I would have waited to get into higher priced properties making my 20% down payment or you know, even if it was a 10% down payment, I was scared to invest at a higher level of property. And I think that's where I made my mistake where when I finally did that after several years investing, I'm getting great cash flow and great appreciation from kind of those middle of the road properties. And I wish I would have slowly built instead of just stacking up all of these $20,000 duplexes in a short period of time. So that's what I would have done differently is not as bought as many and saved up to actually buy these properties that actually became more valuable. Well, thank you guys so much for joining us today. I'm Ashley, he's Tony and we'll see you guys on the next episode. Real estate Rookie. If you're not already, make sure you are subscribed to our YouTube channel at Real estate Rookie and make sure to follow us along at Bigger Pockets or at Tony J. Robinson or at wealth from Rentals. We'll see you guys next time.