@Account Closed I understand Brian just fine. With almost a thousand rental units I'm sure his cash flow is looking good. What I don't understand is why you feel the need to comment and knock people for wanting to invest for cash flow saying it's for poor people and poor investors. You act like your way is the only way to invest. People do great investing for cash flow. People do great investing for appreciation. I don't understand why you get so defensive when someone doesn't like your way of investing lol. This thread was about people's criteria for cash flow. If you really don't like the idea of people investing for that then just don't comment. This wasn't a debate about which is better. It's nobody's place to say that. :)
Cash flow is for poor people and poor investors.
Cash flow is for poor people and poor investors.
Can you expand on this?
Invest for profit! Cash flow is not profit. Rent growth and appreciation are the wealth builders. Here's from another thread where I showed how initial cash flow properties returned massive profit,
Appreciation and rent growth have not been linear but in every decade at one point the figures match up in that the property has doubled in value and rents are up 6%+ compounded annually.
I did get a little boost on that property from the Japanese buying spree in Hawaii in the 80's and the lack of inflation is slowing my snowball growth on appreciation. But I'm probably better off that my appreciation is more based on gentrification (demand) since I'm actually keeping more of that money when I'm buying goods and services.
My mid 2000 purchase for $200,000 doubled in two years and is now worth close to $500,000 so I have 8 years to get to $800,000. My slightly over $500,000 purchase in 2008 (everybody was predicting an immediate crash} has a comparable just sell for $900,000 and a lesser comp on the market for $890,000. That's over $4,000 a month equity gain for a cash flow negative property! Add in about $300,000 rent over the same period. Well do the math.
I am not promoting any area, I just think people should do a correct analysis to determine a good market AND that is not using price to rent or crap rates or cash faux. RENT GROWTH AND APPRECIATION RATE! Investing from afar is expensive and risky. Look for the opportunities in your own back yard but realize cheap does not mean profitable.
Cash flow is for poor people and poor investors.
Can you expand on this?
Read this thread and you'll get a good idea of where Bob is coming from:
@Account Closed I've never been recommended to invest on appreciation. I've always heard appreciation should be the icing on the cake but to never invest hoping appreciation will bail you out. While I can understand your points, there's no denying appreciation has built some really rich folks, I don't understand the concept of investing for cash flow to be a bad idea. I'm just trying to buy and hold for a certain amount of years and look forward to money flowing in monthly. If my numbers make sense then I love the idea of cash flow. If in the future my property is appreciating and I can factor in rent growth then all the better!
If you're investing in CA then I understand that. Different markets require different strategies. I see your points.
@Account Closed I've never been recommended to invest on appreciation. I've always heard appreciation should be the icing on the cake but to never invest hoping appreciation will bail you out. While I can understand your points, there's no denying appreciation has built some really rich folks, I don't understand the concept of investing for cash flow to be a bad idea. I'm just trying to buy and hold for a certain amount of years and look forward to money flowing in monthly. If my numbers make sense then I love the idea of cash flow. If in the future my property is appreciating and I can factor in rent growth then all the better!
http://www.usa.com/torrance-ca.htm
John you are probably listening to the wrong people. Unless I'm investing in a bakery I would be very unimpressed in someone expressing profitability as "icing on the cake". I do not hope for appreciation to bail me out. I know the appreciation rate in the markets I invest in just like some of your mentors may know a rent rate or vacancy rate. My experience is that most throwing around rates have no clue what they actually are but want to belittle me because I know ALL my rates.
What I am saying is that the most profitable properties generally will not initially cash flow. That is pretty much a fact. Not cash flowing initially eliminates all the poor investors and the investors that are poor. But these properties have demand, that's why they don't cash flow initially, from knowing and experienced investors.
I love cash flow but not near as much as profit. I will hold a property that has no cash flow ever that will double in value in ten years. Ask your people how that is not smart investing.
Bob Bowling why do you say that?
Luke Feds I'm curious to hear other people's answers. When I'm looking I want no less than 200. 250 preferred.
Thanks for the response. If others want to chime in, please feel free to do so.
I have the opportunity to invest 2 hours away where 100k houses are possible as well as 200 a month cash flow is realistic or locally where my zip code is almost always negative when it comes to cash flow for rentals (350k house rents for 2k).
@Account Closed the people I've heard it from are people like Brian Burke. He's far from a wrong person to listen to. He doesn't believe in someone being able to know exactly how much a property will be worth so far in the future from natural appreciation. Just his forced appreciation by fixing something. Some people do fine investing on cash flow. There's no one way to invest. If someone's fine with the returns they're getting on cash flow then it's good enough for them.
@Account Closed I'm not knocking your way of investing or anything. I don't believe anyone's way of investing is better than others. Some ways just appeal to me more.
@Luke F. I'd definitely try and hit 200 minimum, but if you're fine with anything over 100 then that's great! Wish you luck on your investing journey. Still waiting and would love others to chime in as well.
@Account Closed the people I've heard it from are people like Brian Burke. He's far from a wrong person to listen to. He doesn't believe in someone being able to know exactly how much a property will be worth so far in the future from natural appreciation. Just his forced appreciation by fixing something. Some people do fine investing on cash flow. There's no one way to invest. If someone's fine with the returns they're getting on cash flow then it's good enough for them.
I'm not knocking @Brian Burke but I'm not sure you understand what he is saying or what I am saying. My "prediction" is that the value in my markets will be double at some point in each decade. That has been factual for at least 5 decades. I don't force appreciation because I had a fulfilling day job. Paint and carpet of a property with a 9%+ appreciation rate.
I believe Brian makes his living in real estate so he needs a way to cover his daily bills. I can invest without that need. If good enough is what you are invest for then good for you. I invest for profit and only trying to educate people that think cash flow is profit.
What even is your definition of cash flow and why do you think it is a good metric to follow in your investing?
I probably would not buy at the top unless I was confident in rent growth in the immediate future. I have bought in every decade since the 70"s and saw 100% appreciation in about 2 years. But I also bought in 2008 when the writing was on the wall and bought at market and have seen an almost 100% gain in appreciation. I'm not sure how I knew that it would be a good investment at that time but I know my market and even if it did go down a little I know it will go back up.
I don't know the Denver market but I do remember in the early 80's when there were stories about the rampant increases in rents and values that the ski employees were renting living room floor space.
@Account Closed I understand Brian just fine. With almost a thousand rental units I'm sure his cash flow is looking good. What I don't understand is why you feel the need to comment and knock people for wanting to invest for cash flow saying it's for poor people and poor investors. You act like your way is the only way to invest. People do great investing for cash flow. People do great investing for appreciation. I don't understand why you get so defensive when someone doesn't like your way of investing lol. This thread was about people's criteria for cash flow. If you really don't like the idea of people investing for that then just don't comment. This wasn't a debate about which is better. It's nobody's place to say that. :)
@Account Closed I sell on contract rather than rent so I'm looking for a 2-3% interest rate spread on $300-$500k homes. That works out to a minimum of about $300 to a max of around $800.
I would agree that appreciation is nice but there's no way to know what it will be, the only thing you can know is what it has been. Another thing about appreciation investing vs. cash flow investing, is that you can't eat equity. You can use cash flow for living expenses, for repairs, renovations, and for further investing. But equity doesn't directly benefit you unless you sell or borrow against it.
It's all fine and good to be rich on paper but that doesn't positively impact your life unless you just want bragging rights. You could have millions or billions in equity but not be able to buy groceries!
@Account Closed I understand Brian just fine. With almost a thousand rental units I'm sure his cash flow is looking good. What I don't understand is why you feel the need to comment and knock people for wanting to invest for cash flow saying it's for poor people and poor investors. You act like your way is the only way to invest. People do great investing for cash flow. People do great investing for appreciation. I don't understand why you get so defensive when someone doesn't like your way of investing lol. This thread was about people's criteria for cash flow. If you really don't like the idea of people investing for that then just don't comment. This wasn't a debate about which is better. It's nobody's place to say that. :)
John, I'm only presenting facts. You seem to be the defensive one. You brought Brian into this discussion and are talking for him. I would not do that. I am more than happy to discuss appreciation with Brian or anyone else. Brian can speak for himself.
My statement about poor people and poor investors is factual. If you cannot afford initial cash flow then you will have to pass on some very profitable investments. If you are a poor investor you will not understand the difference between profit and cash flow. See, just facts. No need to get all crazy. Just because you don't understand something does not make it wrong and just because someone is trying to educate you does not mean they are attacking you.
As far as you telling me where and when I can comment, well, who made you the internet cop?
Also not one person has even defined "cash flow" so y'all just rambling on.
Bob Bowling you said I was listening to the wrong people. I simply told you who I was listening to, hardly defensive :) and I never once said you were wrong, I clearly stated there's no one way to invest and no ones way of investing is better. And I said if you don't like what people are talking about, don't comment. If I saw a post dealing with something I didn't like, I wouldn't waste my breath. :)
And yet here you are!
Doug Pretorius all great points! I agree! I'm in it for the long haul. And cash flow, to me, seems great. I'd love for my properties to appreciate a lot, who wouldn't, but I'm more in this for the passive income. It does seem fun to buy properties low, watch them appreciate like crazy and then sell them. But that's more of a job to me. I just want passive income. All good points you made.
So how is it more of a job to buy a property and then sell it at double the price vs getting a rental and getting a tenant and catering to their needs and hoping that they will pay rent each month because if they don't you can't pay your cable bill? How is that defined as more passive than the appreciation play?
The other point I'm trying to get across to the newbies is that "cash faux" is calculated using rent rates, vacancy rates, expense rates, etc. All these are looking to the future based on past performance. Appreciation rates are pretty much the same but a little more difficult to get sound numbers. Why should that make them "magical" or "icing on the cake"?
The last time someone tried to use @Brian Burke to support their position he responded that he had met the person but that was about it. I have another BP member that wants to say Warren Buffet disagrees with me. If Brian can't calculate a plausible appreciation rate then I think that it is up to him to say that. John, I can't seem to @ him. Can you get him to comment?
When I'm looking I want no less than 200. 250 preferred.
On a $4,000,000 investment? What kind of investing is that?
I have to Disagree on that one my Family is Been Investing in Real estate for over 70 years, i am the 4th generation and my Grandfather now 85 and very very well off gives me his advice and tells me if you can get some free money ( cash flow ) that what he calls it is still the best cause somebody is building equity for you and you getting a return on the original cash investment you did out of pocket its not that is for poor investors is for people who are starting and want to make quick money that part is true but not always Cash flow is a powerful thing with the right cash flow property you can start extracting equity and build savings and grow your portfolio even more no matter how rich you are, the shorestein family large real estate owners which i happen to know personally says less money out of your pocket more money that will come in after pay day. interpreted how ever you want thats my opinion not all deals can be cash flow but if you find one is good to get in. @Account Closed