If you are considering investing in real estate, the following question will help you pinpoint your approach: Do you need to build cash flow immediately, or are you looking to maximize the return on your investment over time? The answer is one of the first questions that will determine your best approach to real estate investing.
When examining the different strategies, perspectives, and angles of real estate investing, try to think of your needs in terms of whether you need to generate cash flow or not.
o If you would like to build a real estate investment portfolio that will allow you to quit a 9 to 5 job, then cash flow is a definite goal to consider.
o If you are not concerned about consistent cash flow, but prefer to grow your money and realize a bulk lump sum at some point in the future above your cost, then perhaps going the equity route is right for you.
Perhaps you would like to accomplish both outcomes.
My personal recommendation for investors is to adopt a diversified strategy that incorporates both cash flow and equity appreciation over a holding period of five to ten years.
The phrase "fast nickel, slow dime" implies that your money will grow larger when your investment strategy allows for the growth of compounding interest to increase your return on investment over time.
Your cash flows will have more time to grow to maximum levels if re-invested in high-yielding savings vehicles like a CD or money market account in addition to the maximum equity appreciation of your properties in combination with principal reduction that occurs over time.
Building financial independence requires a diligent plan and system of checks and balances.