“Cash flow vision” is a common blind spot among real estate investors who “worship at the altar of the cashflow” (as my good friend Jeff Brown would say).
It’s a tendency to ONLY pay attention at the cash flow produced by the property on an annual basis. For instance, an investor will run the Year 1 numbers on a rental property to calculate the cashflow for the year. Rent minus expenses minus mortgage payment equals cashflow. Then they divide the cashflow into the amount invested in the deal and calculate the cash on cash return. This return is then compared to an arbitrary return benchmark and a decision made.
Cash flow is nice, don’t get me wrong. But cash flow is not where the MAGIC happens in real estate.
The MAGIC is in the long game: Where you invest $37,000 into a rental property and net 3.3x that amount 10 years later.
The cashflow is the dividend you get every year and it makes you some money. But the growth over time is what makes you a fortune.
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