Comments on: Purposeful Planning & Cash Flow Management — Your Million Dollar Steak

By: David Shafer

David Shafer — Wed, 13 Aug 2008 13:29:00 +0000

Josh, you will note the last section of my post that accounts for bringing that cash flow back into play. With just the cash flow from one duplex after 10 years you have $250,000 minus taxes in which to play with. Maybe a commercial property or an apartment complex or maybe you are ready for investing with a real estate developer. I don’t believe real estate should be a hobby, but a business, so moving into different areas as one’s capital and experience increases should be part of the wealth building plan. Do you have one?

Cher, I don’t think in terms of months. I strategize my investments in terms of decades. BRKB is down 15% in the last few months while HCN is up 10% in the last few months. But it is really just noise. Short term you are at the mercy of the emotions of speculators, while long term the fundamentals of the business and its cash flow dominate!

By: BawldGuy

BawldGuy — Wed, 13 Aug 2008 05:02:01 +0000

Josh — Think about the region in which you live. Now, ask yourself: Do I want to invest there, or in faster growing region where jobs/capital keep flowing in?

Gettin’ your start there is one thing. Remaining there will retard your capital growth rate dramatically.

By: BawldGuy

BawldGuy — Wed, 13 Aug 2008 04:59:05 +0000

Cher — REITs shouldn’t be taken as a group. They should be analyzed separately, just like you do with real estate. Over the long haul, they tend to do well. I don’t know what they’ve done the last few months.

BH? It has,over the long haul, embarrassed the market. Of course it goes up and down with the market. Since it’s performance over the last 40+ years is more or less the gold standard, I’d feel safe with the stock.

By: Joshua

Joshua — Wed, 13 Aug 2008 04:46:55 +0000

*takes step back* I see where you are coming from and going to. I meant with more than one investment.

If, for example, someone has 3 investments pulling $4k per year and after two years they would have (not counting any interest earned) $24k. In my area that would be a 20% downpayment + closing costs on another property.

Maybe I’m just greedy and trying to make “mo’ money faster”.

By: Cher

Cher — Wed, 13 Aug 2008 04:39:02 +0000

Thanks David and Jeff. I think this is an excellent idea to invest the cash flow for diversification and liquidity.
How well is BH and the REIT doing in this ecomomy….last few months?

By: BawldGuy

BawldGuy — Wed, 13 Aug 2008 04:32:17 +0000

Josh — First of all, tell me what kinda quality property yer gonna buy with $4,000? If you can grow that annual amount for the holding period, THEN add it to your sales proceeds during your tax deferred exchange? Now yer talkin’.

The point of this post, in my view, is the best way to grow the cash flow while the original investment is ongoing. By maximizing it through prudent management, you’ll be doing exactly what your question addressed.

By doing it in a more Purposeful way, you’ve allowed yourself to turbo charge your next round of investing.

You have the right idea, Josh. You just might be a little too close. Step back and look at the big picture. You buy property. It cash flows. While holding the investment for say, five years, you invest that cash flow wisely. You then sell/exchange the investment. You now have an impressive wad of cash to add.

Over 10-25 years, doing what Dave and I advise will result in significantly increased retirement income.

Make sense?

By: Joshua

Joshua — Wed, 13 Aug 2008 04:19:38 +0000

I love these detailed posts that give a slice (cheesecake?) of inside information.

The one two punch was just given and I think it could be a knockout. Though, my question/comment is that real estate can provide faster and even better returns if done properly. So, why not use “extra” cash flow to purchase more property faster rather than trust others to manage the money for you?