Care about cashflow now or later?

[Amy Wunderlich]

Hi BP,

I have question regarding cashflow and if all investors REALLY require it from Day 1. Here's the background:

I'm taking a course at UCLA taught by Jon Swire, the author of There's No Free Lunch in Real Estate, and he comes from a different perspective than I often see on BP. He advocates Los Angeles investments that typically do NOT cash flow year 1-2/3 (even through year 5 at times) but will lead to high cash flow in later years (and hopefully appreciation as a bonus); these are ideally debt-covering assets (ideally, right, if CapX doesn't slap your year around) with the goal is to buy and hold until the property is producing strong cashflow.

Is this really the mindset of LA investors? Jon is a LA commercial broker so he certainly has a bias to promote these types of sales.

Thanks for your input everyone!
Amy

[Account Closed]

http://www.dailymail.co.uk/news/article-3253673/Th...

$16 billion one year earnings for a business that took YEARS to cash flow!  See, most real estate investors have no clue what the difference is between profit and cash flow. 

Your professor is correct in that you should invest for profit.  In most areas of CA, NYC and Hawaii that profit will consist of both appreciation and CASHFLOW over the holding time.  Shoot, just compare a Midwest purchase to a CA purchase over the last 10 years.  CA will blow the doors off the Midwest properties.