Cash Flow or Capital Gains? What Type of Investor Are You?

By: Ellie Perlman, CEO Blue Lake Capital Group

When investing in multifamily real estate, there’s no one-size-fits-all approach. Some investors are laser-focused on steady, predictable cash flow—those monthly rent payments adding up to passive income. Others are all about the long game, chasing those big capital gains by buying low, holding, and selling high for a hefty profit. The good news is that both strategies can be highly effective; the key is figuring out which style fits your personality and financial goals.

Let’s dive into what defines a “cash flow investor” versus a “capital gains investor,” and then take a fun quiz to help you figure out which type of investor you are!

What is a Cash Flow Investor?

Cash flow investors are like the marathon runners of real estate. They aren’t in the race for a big, one-time win. Instead, they’re focused on generating consistent income month after month. In multifamily investing, this typically means buying properties in stable markets where rental demand is high, occupancy is strong, and rents can support a steady stream of passive income.

Characteristics of a Cash Flow Investor:

Steady Income Focus: You want predictable, reliable income, even if it means smaller margins of profit.
Risk-Averse: You prefer safer investments that offer consistent returns over time.
Long-Term Player: You’re not looking for a quick flip; you’re comfortable holding onto an asset for years, collecting rent checks along the way.
Market Focus: You likely invest in markets with lower appreciation but higher rental yields, such as secondary or tertiary markets.

What is a Capital Gains Investor?

Capital gains investors are more like sprinters—willing to put in the hard work, but aiming for that big win at the finish line. They’re looking for assets that can appreciate significantly over time. These investors focus on markets where property values are likely to rise and often invest in properties that may need some renovation or repositioning to maximize their future sale price.

Characteristics of a Capital Gains Investor:

Big Payoff Focus: You’re looking for significant appreciation in property value over a period of time.
Higher Risk Tolerance: You’re comfortable with the potential volatility of higher-risk investments in pursuit of a large return.
Shorter Hold Period: You’re likely planning to sell the property in a few years to capitalize on rising values, rather than holding it for cash flow.
Market Focus: You invest in rapidly appreciating markets, often in urban centers or emerging neighborhoods where values are on the rise.

Quiz: What Type of Investor Are You?

Now that you understand the basics, let’s have a little fun. Answer these questions to determine whether you lean more toward a cash flow strategy or capital gains mindset:

When you think about your ideal investment, you’re most excited about:

A) Getting regular, consistent income every month.
B) Seeing a huge return on investment when you sell in a few years.

How do you feel about market risk?

A) I prefer stable, predictable markets where I can count on rental income.
B) I’m comfortable with a bit of risk if there’s potential for major appreciation.

Your ideal investment timeline is:

A) I’m happy holding onto a property for 10 years or more, collecting steady income.
B) I’d like to buy, improve, and sell a property within 5 years for a big gain.

Which of these is your favorite investing perk?

A) The feeling of passive income hitting my account every month.
B) Watching my property value soar, knowing I can sell for a massive profit.

What kind of properties do you like to invest in?

A) Properties in stable markets where rental demand is strong.
B) Properties in emerging or hot markets where values are likely to rise quickly.

If you had to choose between immediate cash flow or long-term appreciation, which would you prefer?

A) Immediate cash flow, because I like seeing consistent returns.
B) Long-term appreciation, because I’m playing the long game.

Your Results:

Mostly A’s – You’re a Cash Flow Investor! You love the idea of steady, predictable income, and you’re happy to invest in stable markets where rental demand is high. You’re in it for the long haul and prefer less risk. Multifamily investments that offer solid rental yields are right up your alley. Your focus on income makes you a great fit for secondary or tertiary markets where cash flow is king.
Mostly B’s – You’re a Capital Gains Investor!

How Multifamily Investing Can Fit Either Strategy

The beauty of multifamily real estate is that it can accommodate both types of investors. Here’s how:

Cash Flow Opportunities: Multifamily properties in secondary markets, where rental yields are high, can provide consistent cash flow. These properties tend to offer higher cap rates and a steady flow of rental income, which suits investors who prioritize immediate returns.
Capital Gains Opportunities: On the other hand, multifamily properties in appreciating urban markets, or those that need renovations, offer great potential for capital gains. By holding onto these properties for a few years while they appreciate, you can sell them for a significant profit.

Final Thoughts

Whether you’re a cash flow investor or a capital gains investor, multifamily real estate offers flexible opportunities to meet your investment goals. By understanding your financial style and risk tolerance, you can tailor your investment strategy to match your personality and preferences. Are you ready to invest in a steady stream of cash flow or shoot for a big appreciation win? The choice is yours—either way, multifamily real estate is a great vehicle to grow your wealth.

Now that you know what type of investor you are, what will your next investment look like? Get started by taking a look at our current offerings and let’s grow wealth, together.

P.S. If one of your priorities, like mine, is building and preserving your wealth through multifamily real estate investments, click here to download my new eBook: The Ultimate Guide to Creating & Preserving Your Wealth.