It’s Time To Revisit Cash Flow VS Growth – It’s ALL About Timing

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Back in the day when I used to teach real estate investment strategies and various forms of analysis, I discovered a profound disconnect among the vast majority of students. Whether is was from seminars led by the latest ‘guru’ or whatever real estate investment ‘how to’ book was popular at the time, the concepts of cash flow, capital growth, and time were summarily slaughtered.

You can find the expanded versions of this post in a couple earlier efforts here. However, as a result of several recent conversations the last few weeks, I felt compelled to write a down ‘n dirty primer on the two basic strategies of  investing and how they’re affected by the timing of their execution.

Concept: To the extent you put cash flow first on your agenda, capital growth suffers — and vice versa. If you think you have both in one property, you’re probably correct — you have both in mediocre measure, neither one making the impact desired. In sports it’s like a tie — nobody wins.

Concept: In general terms, if you have at least 10 years till retirement, capital growth is the play you want. Remember timing — you want maximum cash flow at retirement, not today. The more cash flow you have today, the less you’ll have at retirement. Don’t get upset at me, it’s the way it works.

Concept: We tend to complicate what cash flow is. It’s nothing but the yield on invested capital. 6% on $3 million is more than 6% on $1 million. Duh. Build your basket of capital to as large amount as you can, as long as you can, as aggressively as your comfort zone and prudence allows.

Concept: A proven strategy, expertly executed, is virtually crippled when executed with poor timing. Going for cash flow before it’s time is analogous to puttin’ the cart in front of the horse. It simply doesn’t work well if at all.

It’s important to stress how truly simple these concepts and strategies are, and how rewarding — or punishing they can be, depending upon the timing brought to bear on their execution. Some concepts and strategies can be relatively complicated, some might even say sophisticated, especially when used synergistically in concert with each other. However, when taken one at a time, virtually none are rocket science.

For the savvy real estate investor who’s end game is a magnificently abundant retirement, the proper use of strategic timing cannot be over valued. Poor timing is almost universally the crucial factor when retirement plans fail. Also, it’s equally important to understand that whenever we speak of timing various investment strategies, we’re definitely not talkin’ about timing markets.

Well thought out strategies executed in a timely manner are as reliable as gravity.

About Author

Jeff Brown

Licensed since 1969, broker/owner since 1977. Extensively trained and experienced in tax deferred exchanges, and long term retirement planning.


  1. Good article, after looking at the previous one it makes a lot of sense. Your strategy should def. reflect your over all goals. If your goal is to have millions of dollars just before you die (average man retires at 60 & only lives to 73) then yes Capitol growth is the way to go. If on the other hand you realize that money is only the key to the shackles of slavery binding us to the capitalist wheel. Then aggressively pursuing cash flow is the best plan. Then you can “have your number” and strive for it. Mine is $4000 a month cash flow after expenses. When I achieve it I’m retiring. That simple. If on the other hand your number is “more” then pursuing cash flow is def. going to cripple you.

    Sorry for the philosophy… its something I think about a lot.

  2. Hey Rusty — I like the way you think. I would say however, that in my opinion, you could’ve reached your income goal sooner had you gone for capital growth initially. It’s all good though, as I suspect you’re kickin’ butt and takin’ names.

  3. Jeff,

    Love your blog and all your articles here. I want to say thanks for giving so much back to the investing community with your knowledge and experience.

    In one of your previous articles, you gave the example of buying a duplex and prepaying the mortgage with the cashflow as an example of capital growth. I assume the same holds true for using the cashflow to buy additional property? That’s exactly what i’m doing. Basically, I’m trying to see what I could do differently to specifically target capital growth.

  4. Hey Nate — You make a solid point, though for most investors it doesn’t pan out. If you’ve invested for capital growth and have so much cash flow that it can quickly add up to enough for the down payment/closing costs of another property, you’ve already sabotaged your initial capital growth agenda.

    On the other hand, if that cash flow comes from elsewhere, your day job or from flipping, using the cash flow to add to your portfolio makes perfect sense.

  5. Jeff ,
    In regards to Nates comments, I dont see how he is sabotaging his initial capital growth. He still owns the initial property and has used the cash flow from there to buy another property and further grow his capital worth. Please explain what I am missing here. To me it seems like a well thought investment structure.

  6. Hey Itzik — An excellent question, the answer to which relies on keen analysis. Your timing is serendipitous, as I’m writing on the very issue on my own blog. I’ll be giving you a hat tip. 🙂

    I will say, Itzik, that 95% of the time, the decision makes itself.

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