In some previous articles, I’ve offered some general tips and strategies for working with the abundant and often lucrative opportunities that exist with REO properties. In these articles, I have discussed at length the idea of generating cash for your real estate investment business. This might seem a bit contrary to me, given that I’m generally a bigger believer in cash flow (as you can see in large commercial properties), so I wanted to explain this apparent change of heart.
Many of the programs I offer relate to the acquisition of cash flow apartment buildings, which may make some investors feel like this is not for them or the timing is not right. I built a significant portfolio of commercial apartments, but it didn’t happen overnight. I started, like many of you, to research quality deals and acquire the necessary funds to close those deals.
There’s an old adage among investors that has held true through many market cycles and other trends that have influenced the way real estate investors do business. It goes like this:
“We buy and sell real estate to create cash, so we can then buy and hold to create long-term wealth and cash flow.”
This adage is one that captures very well the essence of what I am writing in this article. Is it against the fundamentals of real estate investing to flip properties for quick cash? Of course not. What is contrary (in my opinion) to these fundamentals is making a career out of flipping properties for cash, with no long-term vision to buy and hold cash flow.
Quick money from buying and selling real estate is a necessary tool for many novices real estate investors, and it happens to be a tool that can yield impressive profits. However, I have never met a real estate investor who got rich flipping properties. Why?
This is because once the property has been sold and the profits collected, the investment ceases to be an investment! You must repeat the process to earn more. Long-term cash flow is centered around the accumulation of income-generating assets, a much stronger long-term approach that has created countless riches for investors around the world.
All in all, I still believe that cash flow should be your ultimate goal as a real estate investor, and the best opportunities to achieve that lie in commercial apartments. Cash flow properties are those that you keep as long-term investments, meaning they not only provide income, but also help build significant asset value and wealth.
That said, we often have to crawl before we walk, so the idea of generating cash to generate cash flow is very viable and one you should seriously consider when building your own real estate investment business.