Monthly Cash Flow or Long Term Wealth?

monthly cash flow or long term wealth - ARTOL Investments

Real estate investing is a long term venture. It’s a marathon, not a sprint, so before you jump in you need to be sure it’s the right investment for your needs. The BRRR (buy, renovate, rent, refinance) method does produce monthly cash flow, but its main focus is on the long term wealth built from selling the property after holding it for five to ten years and allowing it to appreciate in value. Are you looking to supplement your monthly income or are you planning for the future? You need to be very clear on what you expect from your investment before you get started with anything. 

The first question you need to ask yourself regarding investing is how do you want your money to perform and serve you? If you’re looking for extra cash flow every month, you should define what amount you would be content with, In real estate, some houses only produce $50 per month in positive cash flow. To an investor focused on the long term, this amount likely doesn’t matter so long as it’s not negative. However, if you were banking on an amount that would help offset your own bills every month you’d be left extremely disappointed. On the other hand, some real estate investments can yield monthly returns in the high multiple thousands. It’s all dependent on multiple factors. The main thing is, you need to be clear on what you expect. If you’re counting on a set amount every month as part of your financial plan, be explicit on what numbers are acceptable. The more specific you are the easier it will be to determine if a particular investment meets your requirements. 

You need to decide what is most important to your financial wellbeing right now, in the present. Most people love the idea of building long-term wealth but for some, quickly increasing their monthly cash flow is a more pressing issue. You can’t ignore your immediate needs for the sake of future gains. To invest long term you need to be bringing in enough each month that you’re comfortable with letting a large sum of money work for you over the course of five to ten years. You need to know your numbers and be clear about what you want to achieve.

If after examining your options you decide that you need a fairly significant amount of cash flow every month (for example, $2000+), you need to come to terms with the fact that long-term investing is likely not the ideal strategy for you at this time. Building future wealth typically means forgoing large monthly earnings. This doesn’t mean you can’t get into real estate at a later time, it simply means it may not be the best move for your current circumstances. Long term investment requires patience and is typically suited for those who aren’t dependent on the cash flow generated by the tenant but rather are interested in the capital gain generated from the sale of the home in the future.

The most important thing with investing is that you are clear on what you want and expect to gain, whether that’s monthly cash flow or long-term capital gains. No one can make that decision for you as it’s completely dependent on your individual circumstance. As much as you may want to get into real estate, it may not be the optimal time for you, and that is OK. Assessing your immediate needs will better allow you to develop a plan for the future without risking your current situation. Since real estate is a five to ten year commitment, you want to be absolutely certain it’s the best choice for you and that it will be sustainable for that time period. Investments are designed to work for you and give you peace of mind, not stretch you out and leave you in a financial conundrum. The last thing you’d want is to get a year in and realize you need your initial investment back. Prioritize the present while making plans for the future.

Take the time to get clear on your expectations and what is realistic for your current circumstances. If cash flow tops the list you may want to consider an alternative opportunity. If however, you’re comfortable with playing the long game to earn higher capital gains and view cash flow as a nice bonus, then real estate investing may be a great option to build your financial future.

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