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Return on your investments-immediate cash flow or wealth creation



Part of the development of your real estate investment strategy is to determine how quickly you need to see a return on your investments. Is it your goal to promote wealth creation or an immediate positive cash flow? A positive cash flow is simply when your cash income is greater than your cash flow, but wealth creation increases the value of your holdings and creates a residual income that is self-sufficient and does not depend on or are affected by an investment .

Of course, a positive cash flow is required for wealth creation, but do not confuse a positive cash flow with wealth. A surplus of $10 may be considered a positive cash flow, but a lost tenant can make a positive cash flow negative. When you make investments in the light of wealth creation, your investment performance will be greater, but it takes time to develop them. Therefore, as you plan your strategy, consider your immediate needs as you plan your long-term goals.

If you are investing $30000 of your personal savings $40000, your immediate goal is probably to create a positive cash flow, so you may want to consider investing in developed properties with a proven history of production of Income. For example, a busy apartment or a small office building.

Busy multi-unit buildings can generate a rapid return on their investments, but may not be appreciated quickly and lead to additional maintenance costs. A well-managed and fully-occupied office building can generate a good income, but 18 months of road construction on the main access road can send your tenants to pack and leave them desiring.

On the other hand, suppose you and nine partners invest $1000 to buy an acre of land not developed for land leasing for a new pharmacy. You will not see a positive cash flow for some time, but the value of the earth will increase once the store is built and you can expect it to appreciate over time. In this scenario, you will have a zero maintenance cost, but you will continue to receive payments during the lease term. This is a common strategy of wealth creation, however, if your savings are low and you are trying to create an improvised college fund for your 17-year-old daughter, this may not be the best choice for you.

As your portfolio grows, your decisions will adapt and the prudent investor selects a combination of investments to create wealth and maintain the cash flow. However, at the beginning, determine your immediate goals and how quickly you need a return on your investments will affect the types of properties you select and the terms you must accept.

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