Market value of the asset over time, realized as a cash flow when the property is sold. Capital appreciation can be very unpredictable unless it is part of a development and improvement strategy.

This is sometimes referred to as the carry cost or carry of the investment. To be successful, real estate investors must manage their cash flows to create enough positive income from the property to at least offset the carry costs.

By leveraging the purchase of an investment property, the required periodic payments to service the debt create an ongoing and sometimes large negative cash flow beginning from the time of purchase.

Real estate assets are typically very expensive in comparison to other widely-available investment instruments such as stocks or bond. Only rarely will real estate investors pay the entire amount of the purchase price of a property in cash. Usually, a large portion of the purchase price will be financed using some sort of financial instrument or debt, such as a mortgage loan collateralized by the property itself. The amount of the purchase price financed by debt is referred to as leverage. The amount financed by the investor's own capital, through cash or other asset transfers, is referred to as equity.

The ratio of leverage to equity often referred to as LTV, or loan to value for a conventional mortgage is one mathematical measure of the risk an investor is taking by using leverage to finance the purchase of a property. Investors usually seek to decrease their equity requirements and increase their leverage, so that their return on investment ROI is maximized. Lenders and other financial institutions usually have minimum equity requirements for real estate investments they are being asked to finance, typically on the order of 20% of appraised value. Investors seeking low equity requirements may explore alternate financing arrangements as part of the purchase of a property for instance, seller financing, seller subordination, private equity sources, etc. Purchase of a property for which the majority of the projected cash flows are expected from capital appreciation prices going up rather than other sources is considered speculation rather than investment.