Cash Flow or Equity?

Question

Hello Investors!

I currently am almost done rehabbing my first out-of-state property in Cleveland, Ohio. My exit strategies are to either rent or sell, as I see both options being profitable. I'm currently 23 and I'm passionate about the entertainment industry, especially music, and real estate investing!

Entertainment doesn't pay well until you work your way up the ladder, so I see real estate as an avenue to financially support myself.

I'm trying to figure out if I want to:

A) first focus on buying several rentals that could support me (through rent) as I also navigate my other interests, or

B) sell my property for around the ARV and grow my equity as I keep flipping houses until I decide to for example, buy apartment complexes.

My current real estate goals are to one day own apartment complexes with many units rather than many houses with smaller units.

To all my experienced investors, would route would you recommend I prioritize first?

Happy Investing!

Patrick Drury · Answer

@David De La TorreJust keep buying more until you find something you can 1031 into that's bigger and then rinse and repeat till all you own is larger multi-family. It takes longer than making a quick buck selling the property, but the long-term results can be substantially better.

Bob S. · Answer

Biggest mistake of my life, was not keeping 50 or so more of the 500 I flipped in Cleveland, cost me millions.  David, wealth is built not flipped. Now depending on where and how much you are all in can make a difference. Feel free to reach out I a more than happy to give you suggestions.

Nathan Gesner · Answer

1. Get real clear on your goal. "I want to live off cash flow" isn't a goal, it's a theory or a wish or an idea. "I want to earn $4,000 per month after all expenses" is a goal that you can reverse engineer and work towards.

2. My philosophy is very simple: never sell a property unless you can (a) put the money into something that provides a better return or (b) it moves you closer to your goal.

3. It takes time to build an income you can live off. Many YouTube gurus will sell the idea that it can be done rapidly, but that requires a good market. We do not have a good market. I bought 33 doors and 135 storage units in six years, but the market was ripe and I earned a lot of money to invest. I haven't bought anything since 2022 because the market has changed.

You are 23. Don't try to force wealth. Earn money, save money, invest money. It takes a while to gain traction, then it starts to grow exponentially.

David De La Torre · Answer

I appreciate your wise words, thank you Nathan!

David De La Torre · Answer

Thanks for the insight, Ko! Definitely something to consider.

David De La Torre · Answer

I appreciate the solid advice, thank you!

Ko Kashiwagi · Answer

Hi David,

It's often said - cash flow is what makes you rich but equity is what makes you wealthy. Ultimately it depends on your market, but given Cleveland is a good area for rentals, it's probably a good idea to keep at least some of them. You can also choose to cash out refinance and get benefits of both the flip and rental (BRRRR strategy).

Cash Flow or Equity?

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