BawldGuy Axiom: To the extent the real estate investor pursues cash flow, they hinder capital growth. The converse is equally true.

Let’s construct an example to illustrate the principle.

At 42, you own your own home, but will be buying your first income property. Your plans are to retire at 62, if possible — giving you 20 years to get the job done. You have no problem going to 65 if it makes sense. You have a total of $200,000 for down payment(s) and closing costs to get you started. If you opt for bigger down payments and higher cash flow, using accumulated cash flow for future purchases, you’ll begin with two initial acquisitions.

Two properties at roughly 260,000 apiece, using 35% down plus closing costs will take about $190,000 or so. The cash flow generated will total approximately $14,300 annually. It’ll take ya 6 years 8 months to accumulate enough for your next purchase. That’s IF interest rates haven’t risen too much, and IF there’s been no real increase in values. If either one of those is true, much less both, your plan hits a significant roadblock. [Read more...]

Regular readers know that I round out my real estate and EIUL ownership with a couple of stocks. 2 are dividend-oriented stocks. The final piece of my financial puzzle is Berkshire Hathaway. I have been buying Berkshire for over 12 years now. Thought you folks might like a little discussion on my thinking and why I collect Berkshire Hathaway.

First, for those that don’t know Berkshire is run by Warren Buffett one of the world’s richest people and generally considered the best investor of the last generation. His 47-year annual rate of return for Berkshire is over 21%. People like to think that Buffett has lost his way. Back in 2000 there was much chatter about this and again a couple of years ago. Its true the last 10 years he has not gotten anywhere near that return but remember no one else has either. [Read more...]