Invest in Real Estate for Cash Flow - Forget the 'Get Rich Quick' Strategies

Have you ever read something on a blog or overheard a conversation...or even been given advice from another investor that just seems so off that you have trouble taking antying else they say seriously?  Ok, I will admit they may be a little harsh.  But seriously, sometimes even experienced investors needs to step back and really dissect what they are saying.  Here is an extremely dumbed down example of a recent conversation, but the point is the same.

I recently heard a statement from another investor that "no one had ever gotten rich off of cash flow." To me, this sounded like a statement from someone who didn't fully understand the power of monthly positive cash flow. It sounded like a statement from someone still living in the delusional world of "I'm waiting for the market to turn around so I can get rich quick on appreciation".

Getting "rich" could very well be a big part of the problem when it comes to understanding the power of positive cash flow and real estate. Being rich is often defined as having the ability to purchase whatever you want when you want it. Building true wealth on the other hand, is often defined as being able to purchase whatever you need when you need it AND passing that same ability onto the next generation and the next generation and so on. Being rich is a financial ability that many chase actively expecting to suddenly be able to define themselves with that moniker. Being wealthy on the other hand, takes time and planning. Building true wealth takes patience and very careful decision-making and when it comes to using real estate as a vehicle to build wealth, positive cash flow is a must.

When investing in real estate, today's market requires an investor to look at several factors before deciding to purchase. The SINGLE most important to factor to consider before investing in any piece of real estate whether it is a single family unit, a multiple family unit, a commercial unit or even a multiple family complex is will this property cash flow on a monthly basis. It is always important to purchase investment real estate at discounted pricing. It is equally important to purchase investment real estate in areas where occupancy levels will not be an obstacle. But after factoring in the discounted pricing and the occupancy rates, what does your bottom line show? If it is not showing positive cash flow, regardless of what the future holds and the prospects of a rebounding market, it is not a proven formula for building wealth.

Wealth is built with real estate over time. By allowing a piece of investment property to perform. If an investor makes a leveraged purchase and has a note each month, then tenants pay down that note and the investor uses the cash flow to pay the principal down quicker. If an investor makes an all cash purchase then the tenants gives that investor a monthly yield higher than a return the investor could get investing elsewhere. Both purchasing strategies lead to long-term wealth building which is the key to building lasting wealth.

When you own the property and have used time to leverage your return, the value of the property does not matter. You can cash out at any time or pass the property onto your heirs. The return you are earning is by allowing someone else to pay you monthly for the right to occupy your property. Now, the trick to long-term wealth is using a plan to build a portfolio of investment properties.   Each property should perform month after month and as you add a property, your return grows.

Rea estate investors have been using this technique for decades to acquire property over time and allow their return becomes almost incalculable as it grows over time. Allowing others to pay down your debt and then pay into your return is the most effective and time-tested method for building true long-term and sustainable wealth. So the next time an experienced investor tells you that cash flow does not matter and appreciation is the path to get rich, let them know you are interested in building long-term wealth, not get rich quick.