Cash is NOT King... in Real Estate Investing

[Matthew Irish-Jones]

I have two major issues with Bigger Pockets.  Before I get to the issues I want to point out Bigger Pockets is a great website for networking, free information, investing strategies and many other things.  Overall I think BP is a very well run company and one of my favorite platforms.

#1 - Cash Flow Investing - is for novice investors.  Sorry I know this one is going to be painful for many rookie investors just getting started who want to live on the beach with their mail order cash, but this is not they way investing works.  The real wealth is in equity.  Equity and debt paydown are king.  I have been investing for 15 years, own over 60 units, manage 700, and have data and analytics on everything.  The data is clear:  Stable, B class investing of quality assets, professionally managed makes investors rich through equity. 

High risk, C class or lower investments that chase cash flow makes people poor.  Even if everything goes great on your C class investment, the cash flow generated is normally not enough to make you rich.   Most people making good money on cash flow are self managing and are not really cash flowing, they are just saving on maintenance cost due to not having to pay a market rate.  

I have made FAR more money in equity over time, with great properties, than I ever have from cash flow on my entire portfolio.  Play the long game, buy good properties with low cash returns and stable tenancy.

#2 - BRRRR is a Good Strategy -  The BRRR is a great strategy, but not for you. The BRRR is one of the most complex investing strategies that exist. It takes market knowledge, construction knowledge, proper analysis, financial relationships, rent projections, property management knowledge, and a whole list of other things that are only gained through experience. You can try to outsource that experience to general contractors, property managers, agents, and others (I highly suggest you do), but all of those services will eat into the last "R" of repeat. You will not get to the repeat part, because you have to pay and pay well to get highly trained professionals on your side.

If you are a first time BRRR investor I suggest you outsource to trusted professionals and temper your expectations of infinite returns. If you get a property that has all new mechanicals, fully updated units, get it all done in a timely fashion, and still leave 25% in the deal you are WAY ahead of the game, due to the fact that you have front loaded risk and updated your mechanicals. That will save you big dollars in the future.

When I tell new investors that they should plan to leave 15-25% in the deal they look at me like I have a third eye and normally find another agent. However, the joke is on them, I am a BRRRR investor, have over 30 employees and do all of the work in house on my investments. We use my construction team and my property management team, and I DO NOT charge myself agency fee's. I still normally leave 15-25% in the deal. I am happy to do so because I have fully updated units and have beat the market by a few % points if I leave less than 25% in.

The path to wealth is not Cash... in this business cash is not King... Equity is.  

As a new investor focus on Equity growth over time and you will be rich.  Chase cash flow so that you can get infinite returns and you will be poor. 

[Chris Seveney]

@Matthew Irish-Jones

As someone who has bought A class through C class rentals I would agree. The lower value / class rentals while are more challenging to manage also rarely bring out the cash flow you thought

In my B and A rentals I have had very little issues or challenges. Cash flow was not huge initially but I also did not need it to be. I was going to own them long term which has paid off greatly as I now sit on a ton of equity and they cash flow since rents have increased greater than taxes / insurance and costs

[Jay Hinrichs]

Quote from @Matthew Irish-Jones:

I have two major issues with Bigger Pockets.  Before I get to the issues I want to point out Bigger Pockets is a great website for networking, free information, investing strategies and many other things.  Overall I think BP is a very well run company and one of my favorite platforms.

#1 - Cash Flow Investing - is for novice investors.  Sorry I know this one is going to be painful for many rookie investors just getting started who want to live on the beach with their mail order cash, but this is not they way investing works.  The real wealth is in equity.  Equity and debt paydown are king.  I have been investing for 15 years, own over 60 units, manage 700, and have data and analytics on everything.  The data is clear:  Stable, B class investing of quality assets, professionally managed makes investors rich through equity. 

High risk, C class or lower investments that chase cash flow makes people poor.  Even if everything goes great on your C class investment, the cash flow generated is normally not enough to make you rich.   Most people making good money on cash flow are self managing and are not really cash flowing, they are just saving on maintenance cost due to not having to pay a market rate.  

I have made FAR more money in equity over time, with great properties, than I ever have from cash flow on my entire portfolio.  Play the long game, buy good properties with low cash returns and stable tenancy.

#2 - BRRRR is a Good Strategy -  The BRRR is a great strategy, but not for you. The BRRR is one of the most complex investing strategies that exist. It takes market knowledge, construction knowledge, proper analysis, financial relationships, rent projections, property management knowledge, and a whole list of other things that are only gained through experience. You can try to outsource that experience to general contractors, property managers, agents, and others (I highly suggest you do), but all of those services will eat into the last "R" of repeat. You will not get to the repeat part, because you have to pay and pay well to get highly trained professionals on your side.

If you are a first time BRRR investor I suggest you outsource to trusted professionals and temper your expectations of infinite returns. If you get a property that has all new mechanicals, fully updated units, get it all done in a timely fashion, and still leave 25% in the deal you are WAY ahead of the game, due to the fact that you have front loaded risk and updated your mechanicals. That will save you big dollars in the future.

When I tell new investors that they should plan to leave 15-25% in the deal they look at me like I have a third eye and normally find another agent. However, the joke is on them, I am a BRRRR investor, have over 30 employees and do all of the work in house on my investments. We use my construction team and my property management team, and I DO NOT charge myself agency fee's. I still normally leave 15-25% in the deal. I am happy to do so because I have fully updated units and have beat the market by a few % points if I leave less than 25% in.

The path to wealth is not Cash... in this business cash is not King... Equity is.  

As a new investor focus on Equity growth over time and you will be rich.  Chase cash flow so that you can get infinite returns and you will be poor. 

when I first got on BP I would share the same opinion and then get shouted down by the "HEY i AM A CASH FLOW INVESTOR APPRECIATION IS JUST A BONUS CROWD"  OR THE " YOU CANNOT EAT EQUITY CROWD"

[Bruce Woodruff]

@Matthew Irish-Jones This is so true. Should be a sticky at the top of every page....

[Villy Ellinger]

@Matthew Irish-Jones I agree with you 100%. I mean I cash-flow on my investments, but I'm totally aware that's because I manage them and that is my job. I also BRRRR and that is also my job. I'm a real estate professional and sell real estate too. So when I get clients that tell me that they want to have passive income but also want to buy an STR that cash-flows right away or to BRRR while not doing anything themselves, I just pour myself a drink, lol. So, Amen, brother :-)!

[Stuart Udis]

@Matthew Irish-Jones I thought I had to reach precisely 30 sub $100K houses that meet the 1% rule which will equate to $250 in consistent cash flow each month per house. I figured I could squeeze out an addition $100 monthly per house by adding a bunch of junk fees into the fine print of my leases which my tenants wouldn't pick up on and could take  from their deposits. Perhaps even lease my tenants the scratch and dent washer and dryer I purchased because that would be even more cash flow.  As soon as I reach my goal of 30 doors I planned to live off my cash flow for the rest of my life. Are you telling me real estate investing is not that simple :) 

[JD Martin]

In general I agree with the premise of your post, and think that most new investors would be wise to follow your maxim. 

That said, the most money to be made in residential rental real estate is in C/D class housing in areas on the verge of becoming "discovered" and the influx of residents and investment money driving up prices (the equity that makes you rich). Real estate is pretty much like any other investment - the more risk, the greater the returns. The caveat to this of course is that A, you're going to work your *** off if you invest in C and below housing, and B, it is unlikely to be done successfully by a novice investor unless they just get lucky. 

Look at @James Wise. He's made a ton of money investing in some real bad neighborhoods, such as the neighborhood known as Cleveland 🤣. But he knows things, has teams of people to deal with all the craziness of that class of investing, and can withstand the inevitable financial disasters that come with running that type of housing. Locally, I know an investor that runs a crazy profitable trailer park where he is probably pulling in a 20%+ annual return on his investment - but he has to self-manage because no one will touch it, collects rent and deals with evictions armed, and has several "overseers" living for free on site to make sure no one burns the park down. You got to have a strong stomach to do that kind of investing. 

So yes, for the new investor, they should absolutely think about the long game - buy a decent quality house or duplex in a decent area, and just plan on holding on to it for as long as possible. No question RE is a long game and those who try BRRRRR (I add the last R because there should be one called "Reserves") with $200 cash flow in low cost areas are generally going to be blown out of the water in short order.

[Don Konipol]

The qualifier is that the OP is speaking of RESIDENTIAL real estate investments. I get REAL cash flow of 15 - 20% on commercial property. On the residential side my experience has been that any cash flow I accumulate gets eaten by major "replacement" items every three years. However, there doesn't seem to be (in general) a more consistent performer as to appreciation than the SFR.

[James Wise]

Quote from @JD Martin:

In general I agree with the premise of your post, and think that most new investors would be wise to follow your maxim. 

That said, the most money to be made in residential rental real estate is in C/D class housing in areas on the verge of becoming "discovered" and the influx of residents and investment money driving up prices (the equity that makes you rich). Real estate is pretty much like any other investment - the more risk, the greater the returns. The caveat to this of course is that A, you're going to work your *** off if you invest in C and below housing, and B, it is unlikely to be done successfully by a novice investor unless they just get lucky. 

Look at @James Wise. He's made a ton of money investing in some real bad neighborhoods, such as the neighborhood known as Cleveland 🤣. But he knows things, has teams of people to deal with all the craziness of that class of investing, and can withstand the inevitable financial disasters that come with running that type of housing. Locally, I know an investor that runs a crazy profitable trailer park where he is probably pulling in a 20%+ annual return on his investment - but he has to self-manage because no one will touch it, collects rent and deals with evictions armed, and has several "overseers" living for free on site to make sure no one burns the park down. You got to have a strong stomach to do that kind of investing. 

So yes, for the new investor, they should absolutely think about the long game - buy a decent quality house or duplex in a decent area, and just plan on holding on to it for as long as possible. No question RE is a long game and those who try BRRRRR (I add the last R because there should be one called "Reserves") with $200 cash flow in low cost areas are generally going to be blown out of the water in short order.

[Steve K.]

I always thought the saying “Cash is King” refers to buying power/ out-competing other offers that are using financing by offering cash, and that “Equity comes and goes but the cash always flows” was the trope of the “cashflow is superior to appreciation” crowd. I agree with everything else you said.  Appreciation has done way more for me than cashflow, and really the only thing I care about when looking to buy a property anymore is location. I don’t even use any of my old spreadsheets anymore. I look at location, price compared to surrounding properties (to force appreciation quickly), desirability, path of progress, underlying fundamentals, etc. Basically appreciation potential, and potential cash flow follows all that.  

[Marcus Auerbach]

Agree. If cash flow is what you want start a business, sell coffee out of a trailer, wash driveways of buy a laundromat. Real Estate In-vest is for long-term wealth. 

The ideal combination IMO is a business that generates cash flow and then investing that cash flow it into A and B real estate assets.

I just recently met a guy who had held and self-managed class D portfolio for 40 years and he can't retire, he has nothing to show for. Had to refi a few properties to pay for big ticket rehabs along the way: capex exceeds cash flow over time...

[V.G Jason]

Quote from @Steve K.:

I always thought the saying “Cash is King” refers to buying power/ out-competing other offers that are using financing by offering cash, and that “Equity comes and goes but the cash always flows” was the trope of the “cashflow is superior to appreciation” crowd. I agree with everything else you said.  Appreciation has done way more for me than cashflow, and really the only thing I care about when looking to buy a property anymore is location. I don’t even use any of my old spreadsheets anymore. I look at location, price compared to surrounding properties (to force appreciation quickly), desirability, path of progress, underlying fundamentals, etc. Basically appreciation potential, and potential cash flow follows all that.  

Look at cost to build on that parcel, and that parcel sq ft versus others too. This is how you find the value of the property. You mitigate risk with no restrictions(HOAs/covenants), debt service, climate concerns, and general accessibility. Ultimately, what you said--location-- is the ultimate risk off AND reward ON play. It's a dual weapon.

There's even a big net cap/cash flow poster on here that's more or less walked into this debate and admitted not holding was a mistake. And appreciation was the best.

Quality over quantity, folks. If you never listen, you will learn. 

[Don Konipol]

All posts have a common theme - they’re based on the posters PERSONAL experience, beliefs, and real estate education/knowledge.  Nothing wrong with that - it kinda “plays it safe”.  BUT, to accelerate wealth building the investor needs to be open to strategies, tactics, investment types OUTSIDE their “comfort zone”.  For example, there’s a lot of “you can’t get cash flow, you can get equity buildup” in this thread.  And, if you are buying a property that is already in good condition, or is fairly easily to rehab, you’re probably right.  However, there are numerous ways to CREATE investments that have 15% or more cash flow AFTER repairs and allowance for cap ex.  The key is CREATE.  If you’re relatively passive, then you won’t be able to take advantage of these situations/opportunities. 

Here’s a short and incomplete list of ways I’ve either utilized myself or financed investors who utilized to create a high cash flow investment. 

1. Bought an auto repair shop for 30% of value because of environmental problem.  Solved the problem for $2,300 and had an annual 22% cash return on my investment (purchased for cash).

2. Bought the first lien note on a auto service repair facility for 30% discount, did a deed in lieu with the tenant/owner/borrower, and a long term lease back providing a 20% annual return 3N

3. Financed the purchase of a 12 unit motel in an area with an oil refinery; the buyer/investor rehabbed and turned it into furnished month to month rentals.  His financial statements showed a 40% annual cash on cash return.

4. Purchased a 2 building warehouse/service center utilizing a 11% hard money loan to gap over the down payment.  Sold the back building which was NOT part of the security for the loan, paid off the 11% mortgage and refinanced with a 20 year fixed 4% mortgage, paying down about $400k.  Used the rest of the funds to turn part of the front building into retail store fronts which leased for 150% more on a per square foot basis. Again 20% annual return.

5. Financed an investor who purchased an old, but rehabbed 148 unit holiday Inn which consisted of 2 separate buildings.  He turned one into month to month furnished housing, and the other building into low end motel.  He sold the motel building and was left with a property yielding him a 18% annual return over the next 8 years. 

[Scott Mac]

Well guys, I agree with all of you.

Although I do see some nuances.

There are bread and butter deals, and there is shark food.

Shark food can put you in a new Mercedes with a Burmeister sound system. Class C or not.

If you have the cash available to swing the bat and are clever enough and have the experience to make it work, a shark food deal can improve your lifestyle.

But what is shark food to one person could be biting off more than he chew to another--without a war chest of touchable/spendable cash.

Which is what I mean when I say cash is king.

just my 2 cents.

[Henry Clark]

Cash is king- means I have to provide all of the cash.

Cash is King- I make offers not subject to financing.   I’m pre approved or have a line of credit in place.  The buyer doesn’t care as long as they get paid.       

I think it’s a question of what was said and what was heard.  

In the end result OPM other peoples money or leverage is the best way to go.  

I believe in @Scott Mac posts when he tells people they are either losing money or losing equity when they say they have say 70% equity in an investment.  They should have use that equity to buy another property.

We have moved to a lower LTV or higher equity position relative to our concern in the economy and backing off scaling as we go into retirement. There are three things wrong with that from an REI standpoint. Not using enough OPM. We sold some locations, thus not holding into assets going into inflation. Not holding onto debt so inflation allows us to pay with cheaper dollars.

Point- each REI deal has to be from the investors standpoint. More cash to avoid PMI. More cash down if your job is insecure so payments are lower. More cash if you're in the military doing BAH payments.

Class C properties. We don't do housing. Self storage and country subdivisions. I love nasty properties. In commercial we can always make more money in nasty properties. Nasty doesn't mean dirty. Greater value add. On self storage development we expect 400% COC in 2 years, country subdivisions we expect 150% COC in 5 years.

[Henry Clark]

OP.  Definitely agree with you equity is the larger part of the gain.  Although we have to have positive cashflow after rent up phase of 18 months or 60% occupancy, which includes P/I.  

[Henry Lazerow]

The best rentals to own are class A/B after 5 years! When bought my rogers park 4 it cashflowed about $12k annually now with rent increases and one unit as airbnb I net out on tax return $40,000 off one property, sure the equity gain is higher but cashflow makes life more fun. I still would never buy negative cashflow but will take low first year returns if it's in a good area as the future growth is where the real money is. 

The lower class properties are also way too much work to self manage if have a full time job. Being able to self manage in A/B areas is a HUGE savings. I even have some California clients self managing these out of state with a handyman and leasing agent on call. Tenants on electronic autopay, so easy. Compare that to a C class building I own where its constant late payments and headaches with roaches from dirty tenants, etc. that one I handed off to a property manager. 

[Becca F.]

I agree. I don't have that many properties but my Class A (SFHs and one apartment building, co-owned) has always done better. To be fair I acquired them pre-2013 so not in this market with high prices. The "cash is king" statement, have to think about that more on a deeper level. If we're talking about cash flow, I could write 10 page paper about my experiences. 

One of the terrible pieces of advice I received was from 2 people who suggested that I sell my California SFH rental (with lots of equity) to "cash flow" more and "acquire more doors" by doing a 1031 exchange into an apartment complex OOS or buy multiple SFHs/duplexes OOS. Hard pass. My property taxes on that home are low, thanks to Proposition 13 (which benefits long time CA homeowners and investors). Buying a multi-family OOS with all the unknowns and my property taxes and insurance going way up is a huge risk. I"m keeping that house.

The recent purchases were Class C in 2023 since I listened to the people mentioned cash flow - what a huge headache (I posted many times about this).  Time will tell if those turn out to be a good investment. I've started talking to long time investors 20 to 30+ years (one that I met on BP) and they have helped me pause my RE buying and come up with different strategies. If I had a dollar everytime someone said "Close to the 1% rule", I'd have a lot of money lol 

[Steve K.]

I've gotten in the habit of offering cash with few or no contingencies then refinancing after closing/ seasoning period. That way I've got the bargaining power of cash with a quick close and a super clean offer, and the benefit of financing later to get the best return on equity/ COC. That's what "Cash is King" means to me: negotiating power.

[V.G Jason]

Quote from @Steve K.:

I've gotten in the habit of offering cash with few or no contingencies then refinancing after closing/ seasoning period. That way I've got the bargaining power of cash with a quick close and a super clean offer, and the benefit of financing later to get the best return on equity/ COC. That's what "Cash is King" means to me: negotiating power.

 Right, again.

Always offer cash, worry about the leverage aspect later. I know for most this isn't practical, but for the one's that can do it-- do it. Waive the stupid inspection, but still get one. Your price should reflect things gone wrong. Right now and the last two years buying distressed in very good pockets of cities have been the best deal in my opinion. Buying ITB in Raleigh, Heights in Houston, east parts of Nashville. The bottom feeding cash buyers are easy to beat and you get such a return on any equity based improvements. Go to a 3/2  2100 sq ft house and make it a 4/4 2800 sq ft house. Itll cost you the same in east Nasvhille as it would in the hood, yet you'll make significantly more dollar for dollar. Go the five points Raleigh buy a distressed $650k house that's a 3/2 1800 sq ft. Make it a 4/3, 2300 sq ft. It's now a mili.

The money to be made is where the work is. And it's almost always going to be the inverse. The fast money is where the work is created. Fast solutions got slow problems, folks.

[Chris John]

While I've definitely made more in appreciation than I have in cashflow, I don't mind knowing that my properties pay for themselves and I also don't mind the extra $5-15k every month.  I'm more than fine with cashflow...

[Travis Biziorek]

I agree with a lot of this but recognize there are exceptions.

Equity is absolutely where it's at. But there are markets where you can get both. They are rare, and hard to spot/access for most people.

I got lucky and fell into one in 2019 (Detroit) and bought C-class stuff hand-over-fist for 2 years. Prices on everything I own have gone up 2-3x and my cash flow went from ~$150/door to $500-$600.

I still believe Detroit offers that opportunity today and is why I continue to pound the table on it. But it is by no means without risk.

Most folks are better off doing exactly what you say... buying properties near them in B Class areas and waiting.

One thing I've considered, and curious your take, is if you truly believe appreciation is everything then why not have interest only loans?

You could argue that the money you spend toward principal is being wasted. Why not leverage that again on another property and ride the appreciation to build even more wealth?

[Charles Granja]

For the sake of providing a counter-argument:

The real estate market has overperformed since 2010, the Fed also started QE during Covid, so saying that you have made more in equity shouldn't be much of a surprise, considering this is one of the fastest run-ups in history.

When you say "Cash-flow" investors, you are really saying investors who want "20-30%" of their total cashflow distribution to be during the hold-period, rather than at the end. You are arguing that investors should want even less, in a very speculative market

Sure, investors could buy bigger and better in upmarket, but how will they service their debt when they are new investors? They don't have enough money. 

If investors buy upmarket and have low or no cashflow, they have access to amazing tax breaks, but how will they use them when they are young, and just starting out? The value of those tax-shields are 1/2 as valuable as a high W-2 earner.

If you invest in an asset, would you rather receive cashflows today, or cashflows 10 years later in bulk? Would you value those cashflows the same, because I wouldn't

The fed plans to solve the housing crisis over the mid-term (I dont believe them), lets say they succeed at building 3 million housing units each year, do you think your assets will hold their value? Or do you think there is exorbitant amounts of price sensitivity in residential considering the run-up in pricing?

[Joshua Janus]

Quote from @Matthew Irish-Jones:

I have two major issues with Bigger Pockets.  Before I get to the issues I want to point out Bigger Pockets is a great website for networking, free information, investing strategies and many other things.  Overall I think BP is a very well run company and one of my favorite platforms.

#1 - Cash Flow Investing - is for novice investors.  Sorry I know this one is going to be painful for many rookie investors just getting started who want to live on the beach with their mail order cash, but this is not they way investing works.  The real wealth is in equity.  Equity and debt paydown are king.  I have been investing for 15 years, own over 60 units, manage 700, and have data and analytics on everything.  The data is clear:  Stable, B class investing of quality assets, professionally managed makes investors rich through equity. 

High risk, C class or lower investments that chase cash flow makes people poor.  Even if everything goes great on your C class investment, the cash flow generated is normally not enough to make you rich.   Most people making good money on cash flow are self managing and are not really cash flowing, they are just saving on maintenance cost due to not having to pay a market rate.  

I have made FAR more money in equity over time, with great properties, than I ever have from cash flow on my entire portfolio.  Play the long game, buy good properties with low cash returns and stable tenancy.

#2 - BRRRR is a Good Strategy -  The BRRR is a great strategy, but not for you. The BRRR is one of the most complex investing strategies that exist. It takes market knowledge, construction knowledge, proper analysis, financial relationships, rent projections, property management knowledge, and a whole list of other things that are only gained through experience. You can try to outsource that experience to general contractors, property managers, agents, and others (I highly suggest you do), but all of those services will eat into the last "R" of repeat. You will not get to the repeat part, because you have to pay and pay well to get highly trained professionals on your side.

If you are a first time BRRR investor I suggest you outsource to trusted professionals and temper your expectations of infinite returns. If you get a property that has all new mechanicals, fully updated units, get it all done in a timely fashion, and still leave 25% in the deal you are WAY ahead of the game, due to the fact that you have front loaded risk and updated your mechanicals. That will save you big dollars in the future.

When I tell new investors that they should plan to leave 15-25% in the deal they look at me like I have a third eye and normally find another agent. However, the joke is on them, I am a BRRRR investor, have over 30 employees and do all of the work in house on my investments. We use my construction team and my property management team, and I DO NOT charge myself agency fee's. I still normally leave 15-25% in the deal. I am happy to do so because I have fully updated units and have beat the market by a few % points if I leave less than 25% in.

The path to wealth is not Cash... in this business cash is not King... Equity is.  

As a new investor focus on Equity growth over time and you will be rich.  Chase cash flow so that you can get infinite returns and you will be poor. 

Investors are eager to jump into the BRRRR method right away and should review this post. It is very difficult to execute as there are so many moving parts and people involved. if you do a few buy and holds first, test out contractors and slowly build your team you can prepare yourself to take on deals like this.

[Jay Hinrichs]

Quote from @Don Konipol:

All posts have a common theme - they’re based on the posters PERSONAL experience, beliefs, and real estate education/knowledge.  Nothing wrong with that - it kinda “plays it safe”.  BUT, to accelerate wealth building the investor needs to be open to strategies, tactics, investment types OUTSIDE their “comfort zone”.  For example, there’s a lot of “you can’t get cash flow, you can get equity buildup” in this thread.  And, if you are buying a property that is already in good condition, or is fairly easily to rehab, you’re probably right.  However, there are numerous ways to CREATE investments that have 15% or more cash flow AFTER repairs and allowance for cap ex.  The key is CREATE.  If you’re relatively passive, then you won’t be able to take advantage of these situations/opportunities. 

Here’s a short and incomplete list of ways I’ve either utilized myself or financed investors who utilized to create a high cash flow investment. 

1. Bought an auto repair shop for 30% of value because of environmental problem.  Solved the problem for $2,300 and had an annual 22% cash return on my investment (purchased for cash).

2. Bought the first lien note on a auto service repair facility for 30% discount, did a deed in lieu with the tenant/owner/borrower, and a long term lease back providing a 20% annual return 3N

3. Financed the purchase of a 12 unit motel in an area with an oil refinery; the buyer/investor rehabbed and turned it into furnished month to month rentals.  His financial statements showed a 40% annual cash on cash return.

4. Purchased a 2 building warehouse/service center utilizing a 11% hard money loan to gap over the down payment.  Sold the back building which was NOT part of the security for the loan, paid off the 11% mortgage and refinanced with a 20 year fixed 4% mortgage, paying down about $400k.  Used the rest of the funds to turn part of the front building into retail store fronts which leased for 150% more on a per square foot basis. Again 20% annual return.

5. Financed an investor who purchased an old, but rehabbed 148 unit holiday Inn which consisted of 2 separate buildings.  He turned one into month to month furnished housing, and the other building into low end motel.  He sold the motel building and was left with a property yielding him a 18% annual return over the next 8 years. 

Don the deal maker :)  this scenario is probably more appropriate for @Chris Seveney sand box but one of my favorites was forming a great relationship with the state manager for a thrift they would feed me their loans in foreclosure.. I would buy the loan within about 30 days of the sale at a tidy discount of course.. If the loan cured or got bought at the steps we made a very nice return QUICKLY and if not we owned it.. Then just did what we do either rehabbed sold  or in one instance tore down and built 8 units etc etc.. Alas Mrs. Pickle ( real name) retired and her replacement would not do this for us.. :(  in this scenario this is when CASH is TRULY KING.  And it was a simple process  Assignment and substitute trustee. Of course they would share their trustees sale guarantee with me .. if not I can order a new one.

[Stephen Keighery]

Cash flow is king, BUT not the cash flow you get on day 1. You need time for the rents to rise, the amortization to reduce principal and yes appreciation.  The cash flow and equity will make you rich in the future and you need other sources of income in those first years so you aren't relying on the cash flow to live off in those early years.