When it comes to making money in real estate investing and building your kingdom, there are really only three kinds of cash to be aware of: Cash Now, Cash Monthly, and Cash Later.
1. Cash Now
Let’s face it, we need money to live and pay the bills. Without this cash we would have to go back and work for someone else. If you’re not a full-time investor, monthly expenses are probably keeping you from quitting your job and working for yourself. If you are employed, your Cash Now is that paycheck, right?
Cash Now can also be the money that you get from “Flipping” properties. Whether it be from Wholesaling, Rehabbing, Subject To, Lease Option or Pre-Foreclosures, we need the cash from each of these investing models to put food on our tables and clothes on our (and our children’s) backs.
Cash Now is good. It’s that chunk money. And it’s fun! But if you don’t continue to do the work, then no cash comes in. (Wow, that kinda sounds like a job!) It’s great for capital building, but it doesn’t make me as free as I would like to be. How about you?
2. Cash Monthly
While those big (Cash Now) checks are coming in, you can reinvest in something that will give you monthly cash — buy and holds. Getting passive monthly income from single family, multifamily, storage units, mobile homes or even notes provides those monthly checks.
Cash monthly will give you more freedom. Freedom to do what you want, when you want. I’m not telling you to stop your Cash Now generator. I’m saying to get some Cash Monthly… use some of your Cash Now and buy yourself some freedom!
Pretty soon you will be building a kingdom. You’ll have enough Cash Monthly to be able to take a month off in summer or what ever you desire!
Do you see how Cash Monthly will give you freedom? But wait … there’s more.
3. Cash Later
Now that you have Cash Now and Cash Monthly, Cash Later takes care of itself. It comes when you sell, exchange, or refinance those properties somewhere in the future.
With properties you have an appreciating asset. Not only is it appreciating every month, but your tenants are paying off your mortgage.
So between the appreciation and the mortgage pay down, your equity just gets bigger and bigger! You can sell your property and get a lot of cash.
If it’s creating a lot of Cash Monthly, you may want to keep those checks coming in. If so, then you will want refinance to get your cash out, but not 100% of your cash, which will only get you in trouble. Take out about 75% of your cash leaving 25% equity in the property, that way if there is a downturn in the market, you’re protected. Not only that, at 75%, you should still have a decent positive cash flow. Did you know that you do not pay tax on any of the money that you take out during a refinance?
Now take that money and go buy some more real estate! You’ve just increased your net worth because you have increased equity in one or two more properties instead of the building that you started with. Can you see how your kingdom is being created? Can you see how it can be created in a short time? Holding single family houses will make you money. Holding apartment houses will make more, and the more doors you have the more rich you get! Which do you prefer?
Though the concepts are simple to understand, don’t be fooled into thinking they can be easily implemented and executed. These are the basics of real estate and how successful real estate investors work in order to maximize their earnings.
Now go become a Cash King or Queen!