Why Real Estate? Cash Flow! by Kim Kiyosaki

Why Real Estate? Cash Flow!

Don’t Miss Out On The Domino Effect That Could Lead To Your Financial Freedom

Rivers flow, electricity flows, and blood flows — wouldn’t it be great if money flowed? Oh wait, it does! Cash flow is actually the beauty of real estate and the reason I love investing in properties. It’s how I’ve been able to accomplish my goal of financial independence.

If you aren’t familiar with this concept, cash that flows in every month without you working for it is produced by investments, or assets, generating cash flow. That cash flow is also called passive income — it’s the primary focus in building infinite wealth.

How cash flow works

Cash flow is realized when you purchase an investment and hold onto it. Then, every month (or quarterly or annually), that investment returns money to you. Cash-flow investors typically don’t want to sell their investments because they want to keep collecting the regular income of cash flow.

For instance, if you purchase a stock that pays a dividend, then as long as you own that stock, it will generate money to you in the form of a dividend — that’s cash flow. In real estate, let’s say you purchase a single-family house and instead of fixing it up and flipping it, you choose to rent it out. Every month, you collect the rent and pay the expenses, including the mortgage. If you bought it at a good price and manage the property well, you will receive a profit (positive cash flow).

The real estate domino effect

One of the best things about cash flow is that you don’t need to acquire hundreds of thousands of dollars in savings in order to reach financial freedom. That’s because cash flow breeds more cash flow.

How?

My first cash-flow investment (in 1989) was a small two-bedroom, one-bath house in Portland. My monthly cash flow averaged a whopping $50. It wasn’t much, but it gave me my start. In fact, that $50 a month was the first building block toward the cash flow I enjoy today.

There comes a point in your investing process where the cash flow from your investments supports not only your living expenses, but also your next investments. Your cash flow breeds new assets, which, in turn, breed more cash flow. Isn’t that spectacular?

I know that diamonds are supposed to be a girl’s best friend, but I’m going to argue that your real BFF is cash flow — once it helps you reach your financial dreams, you can treat yourself to all the diamonds you want.

More cash flow benefits

As you can see, cash flow equates to freedom — once you’re financially independent, you are free to do whatever you want. You can choose to have a life of leisure or pursue a new business venture. You can set your own schedule, travel more and take up more hobbies.

Cash flow is designed to eliminate the fear of running out of money during retirement. As long as you own the asset, your cash will be flowing like clockwork.

It’s also the lowest-taxed type of income (this is not always the case for capital gains taxes, which you’ll get if you flip a house).

And finally, there’s no waiting period — you can start making money as soon as you get a tenant in the property.

Your goal should be to get more cash flow coming in than you spend on living expenses. That is the ultimate in financial freedom — having your assets work for you instead of you working for your assets. What are you waiting for? Today could be the first day of the rest of your life.

Original publish date: February 21, 2019

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