Real Estate Investor Priorities – It’s ALWAYS About Timing

Cash flow is a wonderful thing. Capital growth is truly something to celebrate. Yet both can derail your retirement faster than you can watch it happen in real time. So many real estate investors behave as if both concepts exist in a vacuum, unaffected by all other factors. One of those factors is time — and I’m here to tell ya, time won’t be ignored. Much like gravity, those who ignore it’s powers will either pay a stiff price, or look back and realize they were incredibly lucky.

Let’s don’t talk in terms of age, but instead, years before retirement. If you have more than 10, surely 15 or more years till that day, puttin’ cash flow at the top of your priority list will be the kiss of death — to your retirement income. Of course, that doesn’t matter much if your agenda isn’t to maximize cash flow at the point of retirement. I’ll assume your #1 goal is maximum reliable income at the point of retirement.

BawldGuy Axiom: To the extent the real estate investor goes for cash flow, capital growth suffers — and vice versa. You’ll only get the best of both in the movies.

There’s no gettin’ around that truth. There are types of properties more appropriate for capital growth, just as the same is true for cash flow. Also, the structure/strategy used to acquire a real estate investment property will dictate whether or not it will be more productive for growth or income.

But again, the elephant in the room is timing.

If you’re 43 years old with plans to call it quits at 65, and makin’ plenty of money at work, why on earth would you sacrifice capital growth for current cash flow for which you have no need? Putting cash flow at the front of your chronological line guarantees the inhibition of your invested capital’s growth. But, you might ask, why is that such a big deal? Excellent question, grasshopper.

What is cash flow anyway, but a yield on capital, right?

Retirement income is nothing if not the yield on your accumulated capital, set aside for that purpose. The bigger the pile of capital you amassed, the larger the yield will be in terms of, you know, actual dollars. To put it more simply, a 6% yield on $3 Million is more than the same 6% on $1 Million.

OR

$180,000 is more than $60,000.

BawldGuy Takeaway: Those who opt for capital growth first, then switching gears to cash flow as retirement looms, will be living on the former. Those who insist on emphasizing cash flow now, will be settling for the latter.

There is no third alternative people. Make time your friend, cuz it’s a merciless enemy.

Let’s talk, OK? Gimme a call at 619 889-7100, and together we’ll figure out how to make time your best friend ever. Have a good one.

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About BawldGuy

I'm second generation real estate, first licensed in fall of 1969. Having been mentored by several iconic brokers, I'm also CCIM trained, having completed all 200 hours back in 1980. Have successfully executed well over 200 tax deferred exchanges, many of which have been multi-state in nature. Strong points are analysis and the creation and real world application of Purposeful Plans employing several strategies synergistically. The idea is to arrive at retirement with the most after tax income possible, backed by the largest net worth.

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3 thoughts on “Real Estate Investor Priorities – It’s ALWAYS About Timing

  1. Joshua Gayman

    Great post! Plus if you go for building it up instead of just capital gains, you have something to leverage.

    Reply

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