Posted in Cash Flow Properties, Investing in Real Estate, Retirement Accounts, Single Family Houses

Cash Flow = Personal Freedom

The thing that sets Americans apart from citizens of other nations is their belief in freedom and their optimism that they will always be able to achieve it.  What sets entrepreneurs apart from other Americans is their commitment to the proposition that freedom isn’t possible without a degree of financial freedom, and they will be able to attain this through their own efforts.

What sets real estate entrepreneurs apart from other entrepreneurs is that they don’t seek freedom by building massive stock companies, but by the creation of income streams that build wealth while enabling them to support their families.  This is a deceptively complex subject that relies upon a wide variety of knowledge, skills, experience and “street smarts.”

Financial plans and goals are integral for the entrepreneur to achieve success.  The “end all” of financial success is personal freedom and the following is a natural progression for achieving full personal freedom.

  1. You won’t be free until you choose where and when you work, and for how much.
  2. You won’t have that choice so long as you’re dependent on a “job” for your financial support.
  3. To be able to quit your job, you have to work for yourself.
  4. You shouldn’t make a radical change to quit your job until you have enough money to support your family for one year.
  5. You won’t have that money unless you generate after-tax savings from both your job and your entrepreneurial activities.
  6. You won’t be able to do that without a command of budgets, taxes, business principles, dedication and discipline.
  7. You won’t learn everything you need to know without a lot of hard work, study and the capacity to tolerate financial mistakes.
  8. When you lose money, your family will lose a portion of its lifestyle, so you’ll need their full support while you make the transition from wage earner to entrepreneur.
  9. The more deals you do, the more you’ll learn; faster.
  10. Each year you’ll make more after-tax money (ATM).

Does any of this sound familiar to you?  If you’re in business for yourself I would bet that we touched on a few of your past experiences, some good, some not so good.  When someone tells me they never made a mistake in business or never did a deal they lost money on, I know they lie about other things too.  Either that or they didn’t do much business.  The fact is, no one “gets it right” all the time and it’s these past experiences that provide the foundation of personal wisdom as we continue through life.

Life experiences shape our thought patterns and beliefs.  What we have experienced in the past can obstruct our view of the future if we are held hostage by our past failures and negative experiences.

Just because you got divorced, it doesn’t mean there is no other companion out there for you.  Just don’t go back to the same personality type that didn’t work out.  I know, I have friends that were in an abusive relationship and they went right back into another one, like a dog returning to its vomit.

The same goes for business, learn what you can from negative experiences and be determined to not make the same mistakes.  Heck, why would you want to when there are a whole bunch of new mistakes you have yet to discover?  Isn’t that really what life is all about; learning from our experiences and moving forward with new found knowledge to explore, achieve and continue to build on what we’ve learned.

Heck, my hope is to still have goals when I die because I always want to be pressing forward toward some type of personal achievement.  I don’t care if its catching a fish, lowering my golf handicap or hiking down the Grand Canyon… I always want to have goals that I can reach for to make my life more interesting, fulfilling and fun.

Being in the real estate business has allowed me to meet all kinds of interesting people across the globe.  The experience of communication with like-minded similar-principled people is not only engaging, but interesting, fun and it can be financially rewarding for folks that are walking down similar goal-oriented paths.

Quite frankly, I love what I do and I love making new acquaintances that have the potential to create lifetime friendships and in some cases, business relationships.

Personal freedom and financial freedom are thoughts that I’ve held captive since I was seven years old.  Think I am kidding?  I remember being seven drinking a can of cherry soda at the neighborhood store.  As I sat on the lawn under a tree in the shade, I decided my goal was to be able to drink cherry soda on an island and be able to drink as much of it as I wanted, when I wanted, and for however long I wanted.

That goal sparked me to have four paper routes, cut lawns in the summer, and shovel snow out of the driveways in the winter; all in order to have the money to do what I wanted at an early age.

Clearly my goals have changed and so has the way I’ve made money.

When you are young, you work to get paid until you can find a way to have your money work for you.  We are all familiar with the term “leverage” as used in financing real estate.  But leverage to an entrepreneur means so much more.  It means leveraging people.

As an entrepreneur, you want to get paid in direct proportion to your knowledge and ability to take action.  You also want to surround yourself with people that can make you more money while you attend to your core business or simply do what you do best and let others do the rest.

Most people with their eyes on retirement look at a nest egg and they are trying to save up toward some fixed amount of money.  I know, my brother has been fixated on $1.1 million, and believes that social security and his pension will keep him in the lifestyle he has become accustomed to.  While he should be commended for his disciplined ability to save money and take care of his family, I think he is missing part of the ball.


It’s not about savings, although that is important.  It is all about “cash flow” so that the wealth you have created can produce a cash flow that will enable you to enjoy the lifestyle you’ve dreamed about for your golden years without eating up your principle.

The wealth you’ve created should produce more and not disturb the principle amount.  Your money should make money while you sleep.

The purpose behind wealth creation is to create cash flow to achieve lifestyle and other worthwhile goals.  Under the umbrella of “cash flow” we can include business earnings, profits, wages, salaries, rents, interest and principal on loans, proceeds of real estate sales, options, leases, CDs, Treasury Bills, retirement plans, cash-value insurance, annuities, legal settlements, lottery winnings, harvest of timber, crops, etc.

If you read back over the list carefully, you may discover sources of cash flow you overlooked and these should surely be explored and exploited.

Let’s discuss this more closely:

This is an old saying, “Everyone wants to go to Heaven, but nobody wants to die.”

In short, they want the best of everything without having to pay the price.  Except in situations where money is acquired by inheritance, luck, crime or gift; something of value must be given up in exchange for it.

Those few who are willing to sacrifice and to forgo current pleasures for long periods of time while they save their wages and invest in their own future are rewarded at some point in time by being able to have the capital they need in order to earn enough income to support their lifestyles.

The typical goal of most entrepreneurs is to exchange a combination of street smarts, long hours, and willingness to undertake reasonable calculated risk for market knowledge and income.

Most entrepreneurs succeed by starting up small businesses and build financial security by slowly building their income and paying off their debt over a period of years.  Landlords are usually in this category.

The old way of doing business was to use creative techniques for acquisition and ultimately pay off the properties from the rent and ultimately enjoy the wealth creation and cash flow.

In the New World Order of Real Estate it’s a lot different because the opportunities to acquire properties for all cash using retirement accounts and other monies are truly extraordinary.

The greatest “house buying” opportunity of our lifetime is in full swing and for those that have the capital to buy well located houses for cash flow – just do it.

This is the time to set up your retirement with income producing cash flow houses.  It all starts with the goal of how much cash flow you need.  Here is an exercise I’ve done over and over with many investors: Simply take that monthly figure of desired cash flow and divide it by an average net rent of each house and you’ll know how many houses you need.  Then, determine the cost of those houses and multiply it by the number of houses you need and you’ll know how much capital you need to buy the cash flow houses to support your lifestyle.  For example, if you need 20 houses that produce $700 net per month and the average house (undervalued and completely fixed up) is $85,000.  Then you will need $1,700,000 to receive $14,000 per month.  Of course, if you bought right, those 20 houses should have a real value of about $2,700,000 which means your equity position and wealth increased $1,000,000 upon acquisition.

Can this be done in this market? Absolutely, for those that take action while we are shuffling around the bottom of the real estate market.

Freedom, especially economic freedom, never comes easy.  Don’t confuse freedom with wealth.  They are not the same at all.  Mere possession of money without a corresponding degree of choice as to how to spend it, or time to enjoy it, is just another form of servitude.

Do you really think the Queen of England, the world’s wealthiest woman, is FREE? Or Tiger Woods?

The person who is truly free is the one who faces each day in complete charge of their life.  They are able to make decisions:

What to do, When to do it, How to do it.

We have to do it, or simply decide not to do it.

That’s true freedom…