---
title: 'Why Appreciation Is Smoke: A 25-Year Real Estate Veteran''s Take'
source: 'https://youtube.com/watch?v=bG6kdHEdwsk'
video_id: 'bG6kdHEdwsk'
date: 2026-08-06
duration_sec: 69
---

# Why Appreciation Is Smoke: A 25-Year Real Estate Veteran's Take

> Source: [Why Appreciation Is Smoke: A 25-Year Real Estate Veteran's Take](https://youtube.com/watch?v=bG6kdHEdwsk)

## Summary

In this interview, a seasoned real estate investor with 25 years of experience explains why he deliberately excludes appreciation from his investment calculations. He emphasizes that appreciation is 'smoke'—not real until the property is sold—and instead focuses on cash flow and value-add strategies that directly increase rent.

### Key Points

- **Appreciation Excluded Intentionally** [00:00] — The investor confirms that he intentionally does not include appreciation or value-add in his yield calculations, explaining that his 25 years of experience, including witnessing the crash, have shaped this approach.
- **Crash Experience Shapes Strategy** [00:16] — He recalls seeing people with $10 million balance sheets go bankrupt, divorce, and leave the game during the crash, reinforcing his belief that wealth requires holding for 10 years.
- **Appreciation is Smoke** [00:31] — He states that appreciation is 'just smoke' and not real until the day you sell, aligning with his long-term buy-and-hold philosophy.
- **Value-Add Only If It Increases Rent** [00:49] — He will include value-add improvements only if they increase rent, such as converting a two-bedroom to a three-bedroom, which can raise rent from $900 to $1450, but only if the square footage works.
- **Plan Required for Value-Add** [01:01] — He emphasizes that he must have a plan; cosmetic upgrades like a new kitchen and bath don't generate rent, so he dismisses them as irrelevant.

### Conclusion

The investor's core takeaway is that real estate wealth is built on cash flow and rent-increasing improvements, not speculative appreciation, which he considers unreliable and risky based on his experience.

## Transcript

appreciation smoke. You said earlier, when you were talking about figuring out your yield, when you were talking about what's a good deal in your market, you specifically did not mention appreciation or any type of value add. So I take that that's intentional. And can you explain to
us why? Again, you got to remember what I've seen over 25 years. I've seen the crash up close and personal. I saw people with $10 million balance sheets go bankrupt, divorce, and leave the game. And as I said in my wealth formula, the whole idea of getting wealthy is you have to hold for 10 years.
And appreciation is smoke. It's just smoke. It's not real until the day you sell. And I'm a long-term buy and hold investor. I will include value add if it increases rent. Like, for example, one of my greatest things is to buy a two-bedroom but convert it to a three, assuming the square footage works.
So I will do the math, including make ready of adding a door, a closet, and that. and then I'll have the rent go from, you know, a two bedroom might be 900 to a three bedroom being 1450. I'll do that.
Like that will be included, but I have to have the plan. I'm not, oh, it's got a new kitchen and bath. That doesn't give me rent. Are you kidding me?