CASH IS KING!!

-Learn How To Generate Cash First!

By Bob White
The White House Adventure, Ltd. Co.

How to begin, where to start? I know the dilemma well. You take the courses, read the books, research the MLS listings, pour over the daily classifieds, but when it comes to making a decision on a strategy in real estate confusion reigns. The more you study the more confused you become and the more confused you become the more you study... and the beat goes on. It's information overload and I understand it because, like many others, I've been there.

It seems to me that there are three ways to profit from Real Estate: use it to generate cash flow, cash or equity. There's not much else right? Cash is money in hand today to do with what you want. It provides for a lifestyle now, not tomorrow because it will be gone by then. Cash flow is money over time. It can be the secret to financial independence providing residual return on investment stretching out into the future that, if managed properly, can provide extra money in the short term and eventually perhaps pay for a lifestyle without having to run in that squirrel cage every day. And then there is equity which is that pot of gold at the end of the rainbow that can keep us up at night with stars in our eyes.

So, what is the best way? I'm not here to preach one method over the other as a long term investment strategy. It seems to me that many beginning investors opt for the buy and hold, cash flow road as a starting place and, in my humble opinion, this is not the yellow brick road that the gurus promise. I say learn how to generate cash first. Why? Cash provides options for improving your lifestyle, paying off debt, building a savings nest egg, taking a long-overdue vacation, etc. I dare say that if you have been building cash flow for some time a shot of cash would be pretty nice about now.

But remember, I'm talking about where to start building your Real Estate fortune. There are many ways to make money in real estate, so many courses, so many gurus each with the answer, but what is right for you? I contend that, if you begin your trek by learning how to generate CASH, you will be better prepared to make decisions on your long term strategy.

If it was easy everybody would be doing it! This is not a business for the faint of heart. I don't care what the gurus say, to make your living in Real Estate takes commitment to long hours, hard work and creativity. If you are not prepared for that you might want to look elsewhere for your fortunes. It matters naught whether you decide to pursue cash flow via rental property, or large equity payoffs by speculating in raw land, or medium sized profits in rehabs... this is a business that demands hard work and commitment to excellence. It is also true that, regardless of which strategy you select, you will make your money when you buy. One more time... you make money when you buy, and if you don't know how to buy right you will lose in Real Estate.

Building cash flow through rentals or lease options can be a complex and frustrating business. Buying distressed, beat up houses and doing rehabs then selling those suckers can take you down the tubes if you are not tough minded and disciplined to the max. Taxes, maintenance costs, debt service, capital improvements, insurance, vacancies, etc can eat your lunch. Am I suggesting that you not take on these challenges? Absolutely not, but I do believe there is a better way to begin your career in Real Estate, and that is to learn how to generate cash first.

There are those who will preach that the way to generate cash is to go find a deal and buy it at below market values, do a bit of work on it then go borrow against the equity putting the cash in your pocket and rent that house out. Sounds great doesn't it? Well I contend that, while there is nothing wrong with leveraging your assets, this is not a sensible way to generate cash. Borrowed money is not profit, it's simply a liability. Debt is perhaps the most dangerous aspect to being a REI. Again, don't misunderstand me, I'm not saying that buy, hold and leverage is not a workable strategy for building long term cash flow and equity. I am saying that as a beginning strategy it makes more sense to learn the ins and outs of cash generation before buying to hold.

So how do we generate cash? The easy answer is "buy low and sell high,” and surely there is no greater truism than that. Go out and buy a property wholesale and resell at retail. What can be more straight forward than that? When all of the other investment strategies that you study fail—buy low and sell high. It's as old as the hills. But another way that many overlook is buy low, sell low. What? Research and learn what other investors in the marketplace, rehabbers primarily, are buying then go out and find it for them....for a price. Are you going to make the kind of profits on this type of transaction that the rehabbers make? No way, neither do you have the risk. The amount of profit in the deal is generally directly proportionate to the amount of risk in the deal. Not always, but most of the time. The point is, you make a profit proportionate to your involvement then go on and do another, and then another.

For you to be successful at this buy low, sell low strategy you first must learn who is buying what and where. Learn your customers and what they are seeking then go find it for them. Tie the property up with a good solid contract then let those customers know what you have and sell the contract for cash. Wholesale flips can be the quickest, most direct path to fast cash that you will find in any business. You will learn how to establish what a good deal is, how to negotiate and how to contract it. Remember, we make money when we buy, and through specializing first in finding and contracting good deals the beginning REI gains a solid foundation from which to expand into other strategies down the road. Learn how to generate cash first and get good at it. Make it a stand alone business then begin to build cash flow by cherry picking a few deals to hold, or pick a couple of the easier rehabs and try some rehab to retail transactions on for size.

Learn to find the deals and turn them into CASH now and you will be well on your way to any other strategy you select for long term wealth building. Remember... Cash is King and it makes good business sense to become a friend to the King! Happy Hunting!