Investment Diverification Austin

[Michael LeClerc]

Greetings,
Here is a thought that I'd like to throw out there. Its about diversification and cash flow.
When one buys a sf rental for lets say $200,000, and it rents for say $1500/month. After taxes, maintenance and property management one might net $8,000 annually if lucky. Whereas one could invest in businesses where the cash flow could be so much greater. for example, a restaurant that one buys the ongoing business of for the same $200,000 might net $30,000-$50,000 annually. Both ideas have risk, for the houses tenent problems, and damage, vs business failure or underperformance. Both ideas take energy, and while one could hire a property manager for sf rentals, one hires a manager for the business.
Would the eventual asset value of the houses be more than the increased cash flow for the businesses over a 20 year period? I'm not sure it would.

[Timothy W.]

Michael,
Welcome to the next level of real estate investing; where you rub your eyes and say, "Wait a minute...." ;-) There's a point every new cashflow (aka landlord) investor starts to realize they're worth a million dollars and can't afford a sandwich. Some people compensate for this by landlording and flipping, but despite the fact that both businesses are in real estate you can't escape the reality that one is an equity business while the other is a cash-making business. You can make a living pursuing cash businesses only. There are many people that have done quite well at that. I think you can make a better living by also pursuing an equity business at the same time. You need a place to put that cash you're making and I think the benefits of real estate are great, but this is just one opinion. It doesn't NEED to be real estate and frankly in real estate it doesn't NEED to be a real estate business where you handle tenants. I talked with a guy who was blowing my ROI out of the water by growing wheat on farmland rather than investing that money into apartments.

Tim