What’s so attractive about becoming a cash flow investor?
What are the advantages of being a cash flow investor? How does this compare to the other investment options out there?
Cash Flow 101
Cash flow investors prioritize the income thrown off by investment properties. This does not mean forgoing the potential for equity growth via appreciation or value add improvements. But cash flow and yield comes first.
In the past making lump sum gains was often the top priority of many investors, but that’s changing. Plus, what do you do when you have wealth you need to invest? From leading finance gurus to Harvard and MIT professors like Robert Merton, experts are increasingly highlighting the importance of passive income investing. The bottom line is that what most really want is more cash coming in each month. That can be far more valuable than a physical or virtual pot of gold. The size of a nest egg is almost unimportant. It can go up and down, be vaporized, etc. What is more important is how much cash you can actually use, or how much cash flow that capital can buy. This is true for everyday living now, and for retirement.
The Exception: Note that it is important to be wary of the “it’s all about cash flow mindset.” Cash flow is critical, but that means sustainable, positive cash flow. Smart leverage can be used to achieve better cash flow, but when investors cross the line to speculating and over leverage, or allow their expenses to consistently grow to exceed income; that can become unsustainable.
The Benefits of Cash Flow Investing
Flow of Money
Mobile home park investors are able to secure a long term, virtually infinite stream of incoming monthly payments. That can ultimately far exceed the value of the property and capital gains. It’s ‘mailbox’ money that comes every month, and can be spent (or reinvested), without depleting total assets, or how much will come next money. Consider it an early pension. Once your flow of income from investments exceeds your living expenses you can retire with confidence. That applies whether you are 17 or 70 years old.
Investing for cash flow means cash coming in without being tied to your labor, number of hours you put in, or your ability to keep working. If you get sick, injured, have to take care of family members in crisis, or just want to head off on vacation; you still get paid.
Money Regardless of Market Fluctuations
Cash flow from mobile home parks provides income regardless of the market ups and downs, and value fluctuations. Your mobile home park could go up or down in value by $100k with no difference in your monthly income. That can’t even be said of the stock market. If you hold stocks and they plunge in value your income can plunge too, as can the amount you can withdraw without depleting your nest egg.
Never Getting Stuck
Those investing for appreciation and even flipping properties can get stuck if the market changes on them. Appreciation is nice to have. It’s a nice bonus. But for cash flow investors it is just extra icing on the cake. They are already making plenty of money from income.