The Only 2 Reason To Be In Real Estate

The Two Main Reasons to be in real estate are Cash Today and Cash Tomorrow. Let’s take a closer look at each one of them.

1) Cash Today (cash flow or active income) – Cash today is the money that you earn in a short-term investment strategy, i.e., “Flipping” properties, wholesaling, rehabbing, subject to, lease option.  We use the cash from each of these investing strategies to solve our immediate cash flow issues that arise from daily living, i.e., food on our tables, utility bills, clothes and our own mortgage payments.  Cash Now is great concept and provides the investor with the day-to-day funds needed to live a nice, prosperous life.  However, Cash Today has one major flaw, when you stop putting money “in the pipe” eventually it will “stop falling out” the other end.  That is to say, when you stop buying properties to flip there will no more money to spend when you have nothing to sell to other home owners.  Therefore; a second strategy must be employed to provide for future situations

2) Cash Tomorrow (net worth or passive income) – Using some of your “Cash Now” money to buy something that will provide a return (“rent”) for a long period of time will increase your net worth while also provide you with Cash Tomorrow.   Any real estate asset your purchase with your “Cash Now” money will appreciate in value.  Combined with mortgage buy down, the amount of money your tenants pay every month to lower the overall debt on the property, appreciation and tax benefits will provide for a solid base of “Cash Tomorrow.”  As the mortgage balance goes down and appreciation of the property rises, eventually, you will gain a large amount of equity in your “Cash Tomorrow” properties.  This equity can then be tapped as a down payment on your next “Cash Tomorrow” property and so on and so on.. 

Please understand, I’m not advocating one strategy over another. I like the “Cash Tomorrow” properties to build my personal net worth, retirement plan and passive income; however, while using the “Cash Today” properties to provide for my daily life, expenses and active income. 

The key factor in true real estate investing success is finding the balance between “Cash Today” and “Cash Tomorrow” Properties. You can NOT concentrate on one strategy over another in fear that you will lose a segment of your portfolio. I suggest you try and balance your time and efforts 80/20 or 75/25 with “Cash Today” properties taking priority until you have enough “Cash Tomorrow” properties paying you passive income to cover all your monthly active expenses.  Then you can switch your concentration to 25/75 or 20/80.  Please feel free to email me at raymond@realestatemonkey.com if you have any question regarding real estate or real estate investing.