A property that can be sold with a profit in this turbulent market and how the new buyer's position may look 10 years from now, not accounting for any black swans that may appear.

Many say that cash flow is the holy grail of real estate, it is the component that provides many the lifestyle the seek, one sustained by passive income.  Yes, you need cash flow to fund your daily life if that is your goal, but even if you use up the cash the tenants will each month lower the debt on the property, each month a larger amount of the rents collected will go toward the principal.

Most investors will take advantage of leverage, something like a fixed loan amortized over 30 years, as did this investor.

Over a 10 year period a property can be purchased in one part of a cycle and sold in another and the timing of the cycle is not always in tune with your needs.  

A fourplex purchased in 1998 for $157,000 and sold could sell it for $270,000 in 2009.  It could have sold for nearly $400,000 in 2006, so timing can improve your return or hurt it.

Over 10 years the principal paydown is $20,384

Total wealth accumulation over 10 years.  Cash flow $87,000 + appreciation $113,000 + principal pay-down $20,384 = Total $220,000 from one property.  Imagine having several like this.

Now lets look at the new buyers current flow.   It was purchased for $270,000.  The property cash flows net $786.00 per month plus there is about $250,00 principal paydown per month.  

Over a 10 year period the cumulative pay-down principal pay-down is $38,000.   So not only has the property provided a cumulative cash flow of $98,000 (3% rent increases assumed) there is $38,000 of wealth added by monthly principal pay-down and the property will probably be worth more.  Say $400,000 (3% appreciation which is less then the historic 5% not including the 2004-2007 period).  Total potential wealth created $270,000   

What if they property is not worth more.  What if the price stays the same.  Does it matter if the property has provided $136,000 in added wealth to the owner plus there may have been tax benefits which have the potential to increase the true return. 

Cash flow is awesome, but the principal pay-down, an often missed consideration clearly is something to consider.  Imagine now, putting the cash flow to pay-down the debt and accelerate the amortization of the property.  With that added exercise the property would be paid off in about 15 years.