Best Cash Flow Strategies

[James Lee]

What is the best cash flow strategy in your opinion? I was told that owning cash flow residential properties is a pain because of having to deal with the maintenance, tenants and sometimes property management companies. I heard good things about NNN commercial, Notes, and private lending. Are there any other cash flow strategy with little competition, less headache (no maintenance or tenants), high returns and possibly not having to need a lot of cash?

[Mike H.]

I think you've described the holy grail there. i.e. "Little competition, high returns, less headache, not having to need a lot of cash."

Thats called investing in a tech stock and hoping it becomes the next google, amazon or apple before anybody else does.

Ultimately, you have to decide what your goal actually is and then find something to fit. Little competition is not really an option - at least when you think of real estate related investing.  But the others you can get a mix of but I'm going to say you aren't getting all 3.

The thing with lending - which several people recommended - is that it takes money. And you're asking for something that doesn't need to have a lot of cash. What you could do though is to try to raise money to then lend to other investors.  That technically does not require you to have a lot of cash. Returns are good. And less headache.  

That being said, what you're doing there is creating a job. And there is still some headache - when you have to foreclose on someone. Your returns are good if you go into hard money lending maybe but they're nothing compared to what buy and hold real estate delivers. And it might be kind of tricky to raise a bunch if you don't have a bunch of money to put into the entity yourself.

And if you can't raise money, then your returns are going to be nominal unless you have a huge personal nest egg that you can lend out.

I just don't see anything that comes close to buy and hold real estate investing. If you buy it right (say 70 to 75% of the ARV), you can then refi your money back out after some period of time and end up being all in on the house for 0 to 5%. What is your return on an investment of 0 if its making you 3k a year in rental income, principal paydown of another 2k a year, and appreciation of 5k to 6k a year?

Multiply those types of returns by 10 or 20 houses and there's very little that comes close to the kind of returns you're going to get for such small amounts of investment. Thats the beauty of real estate. If you buy right, you're leveraging other people's money (i.e. the bank's) to basically take down the whole deal with very little out of pocket. You're all in at 0 to 5%? Nothing comes close to that.

When that 150k house - that you are all in at 6k or 7k after the refi - goes up 4% or 6k in the year and gives you 3k a year in rental income and gives you 2k a year in principal paydown, you are getting a return that only buy and hold can provide.