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Updated almost 5 years ago, 04/08/2020

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Andrey Y.
  • Specialist
  • Honolulu, HI
1,261
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1,887
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How you can profit from a Big Mortgage

Andrey Y.
  • Specialist
  • Honolulu, HI
Posted

In light of all the recent threads about COVID-19, worrying about tenants not being able to pay rent, legislation that seems to screw over landlords month after month, and ethical dilemmas about where it is our obligation as landlords (or God's children) to cover the bills of tenants because of (fill in the blank)

Cash flow is for poor investors or investors that are poor (Apologize in advance to the BP / GRE / Turnkey advertisers)

Let me introduce to you a concept that is not often talk about, and probably frowned upon over the last 11 year bull market:

Big A** Mortgage (BAM)

Things most investors foolishly ignore..

  1. - Historic rent growth
  2. - Historic appreciation rate.
  3. - NOI per square foot
  4. - Operating expenses per sf
  5. - Capex per sf

Cash flow is for poor investors or investors that are poor.

If you need or hoped for cash flow to pay your cable bill then you probably should not be investing in real estate. The only reason I'm not cash flowing is because of a BAM that I am paying down because I am in a high appreciation market vs. a market where the only reason I may get cash flow is because the prices are so cheap because sellers are trying to unload unprofitable properties, this is by design.

So-called cash flow gets eaten up by CapEx and by pesky critters like the coronavirus. EVERY. SINGLE. TIME. I know that "cash flow" has been shoved down our throats because it makes money for advertisers and those companies selling it.

Its time to wake up and start thinking like the big boys (family offices, hedge funds, and billionaires). They are buying 3.5 caps in NY, London, HK, LA, and SF.. FOR A REASON. That reason is not the dream of cash flow.

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