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Chapter 12 Notes
Robert's Topics > Chapter 12 Notes > Capital Gains vs. Cash Flow
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terry@benchmarkconstruction.com - 7/10/2009 5:56:58 PM
Cashflow Strategies

Robert,

I am currently investing in bulk foreclosures. I am working with a company that purchases thousands of homes at a time. They let me pick the ones I want and charge me a price so they make money and I make money.

I currently have purchased three homes that are cashflowing with 45% cash on cash returns. I am about ready to pull the trigger on a fourth.

I have been paying cash for the properties. We are investigating ways to get them financed. With the credit crunch it has been somewhat challenging. Most of the properties we are looking at are outside our state.

I am also talking with a business broker about purchasing a second business that is cashflowing nicely in this down economy.

Thank you for your insights. You have been an inspiration to me for nine years.

Best,

Terry
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bubba1 - 7/10/2009 7:21:19 PM
Cashflow vs Capital gain...Street smarts/Book smarts...Servival
Cashflow and Capital gains are both great depending on how you use them and your business plan. For me the hardest thing to learn was people and value, not market value property value or your agents value....But what any given deal was worth to me."What does the deal mean to me" and how will it fit in to my business plan.I used rental Cashflow to build equity in all my properties,lower income properties"while I became homeless" with a ten year hold...Then I used the capital gains.Sold properties at 350% to 420% profit at the down turn of the real estate market while the prices were high,used owner carry at 9% and 9.5% for 7 years. Each property would come due on its own year keeping my tax rate down. Each property had a early payoff penalty worth the total interest due over the 7 year term. The reason I use capital gain this time was the foresight of a market crash. Today Arizona has lost 40% to 50% of the property values and with the job losses in the mountain areas holding for rental cashflow any longer was risky so i sold and carried the notes holding my property values and gaining on interest income with my original debt paid off from the tenants. I purchased all my lower income properties with no money down just my word and hand shake. The plan today is to use my seasoned notes for my down payment on my red hotels...Everyone is happy and a win-win for all. The best thing is now I can buy my new rental properties at half price,and change back to my cashflow plan. For me I had to learn to use both to survive...Thats the value of my street and book education,but always remember...What is the value of the deal worth to you,and how does it work in your business plan.Win/Win. (T)Insider.. Again good job on your book robert!,keep them coming. :)
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mrendy - 7/11/2009 12:00:02 AM
Great and imporant concept, may be even a guiding principle
Hi Robert,

Again, great book and thank you for eye opening, mindset changing, and life changing book. Currently, I don't have any particular plan yet, but working on acquiring the knowledge required to invest. The cashflow concept in detail as you explained it in this book alone is very powerful. It gives me a wider perspective and realization, especially how money moves (cashflow) in real world. Investing for capital gains is always seems very tempting and lucrative, but realizing your cashflow principles my perspective changed. I quite dissappointed in myself for missing your "How to raise Capital" seminar, as now I realized that it is truly the number one and most important skill for enterpreneur and investor. I hope you are planning to share it in other format (like DVD as before), or offer the seminar again (which, I understand that you are often not repeating your seminar). Otherwise, I have to learn it myself the hardway.
Overall, thank you for the guiding principles that you have shared with us so far. I believe it is not only life changing for me but also for others.

God Bless You Robert,

Best Regards,

Rendy - Atlanta, GA
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ebime - 7/11/2009 1:03:49 AM
how I plan to invest for cashflow
For the last year and half, I have been actively checking for real estate deals (I'm tearing them down, calculating everything in order to make my experience before I really buy) as well as reading, watching and listening to everything on the topic I could get my hands on. Yes, many of Robert's products are in there!

I had some setback due to illness in the family, but I planned for some acquisitions and am working towards that. Since I already co-own two companies, I am also working on making them more profitable cashflow-wise.
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hcrawley-austin - 7/11/2009 2:01:06 AM
Still Learning
Hi Robert,

I love all of your books. Rich Dad Poor Dad changed my life. I started aggressively purchasing residential properties for cash flow. However, I took an unfortunately pause and started "flipping". I too got stuck, because I took my eye off the ball. The one good thing is I still have cash flow from the properties I bought in the early 90's. Now I am back on track. Unfortunately, I have to dig out of a hole, but that's okay. It was a good lesson for me.

I am now in the process of increasing the profitability of the properties I currently have. I'm also negotiating to purchase 4 new properties using owner financing.

I have a 10 unit apartment, but I really want to stop being a chicken and migrate to purchasing large scale apartment buildings.

I have you new book. I am gleaning so much from all the experts in the book. If you are looking for someone to mentor I would love for you to consider me!! :)
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alexbirm - 7/11/2009 2:21:11 PM
Forex & MLM
Hello Robert and everyone reading. I must admit that I'm not a saavy investor yet, but while I focus on increasing my financial education I have found what I believe is the perfect combination for new investors like me to produce cash flow, and that is investing in Forex combined with Multi-level marketing. The only thing I've had to do is take out a part of my money from my savings account and put it in a company that invests on the forex market, giving me instant cash flow every month from the interest generated from the currency exchange. And creating yourself a team of investors with the multi-level marketing can make you richer, faster than you expect. I really don't know if you recommend this kind of business, but so far it has worked for me. Thank you very much.
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richardlunn - 7/11/2009 4:06:02 PM
Cash generating assets
This is probably the most important area to grasp and as such can be one of the most tricky.
Buying/creating/making/improving assets is the number one goal of the rich, Robert has certainly nailed this.
The thing is, how do you get an asset? As traditionally rich people buy assets, it stands to reason that they are expensive. The better the asset i.e. the more cash it generates, the more expensive it is.
Take a business that generates £1m in turnover. Dependent on a number of factors (including type, profit etc.) then the business would be worth £4m.
Likewise to get hold of a property that will generate cash you will need to spend, say, £100,000. This can of course be with other people's money and created 'out of thin air' but you will have to have some financial credibility in the first place to do this.
So how do we start creating small assets effectively out of nothing or low cost so we can buy bigger ones? This is where the main question lies for a lot of people! Any ideas? LOL.
It's easy to discern the difference between asset and liability. Some people don't realise that a liability can be turned into an asset. For example, you buy a car. A liability that will decrease in value and cost you to run it per month.
However, if you bought the same car and leased it, used it as a taxi, used it to courier etc. it would then become an asset provided that it reaped more money than you spent. (Removing your time as a factor from the equation in this case).
A push-bike would be the same but if you rented it out then it becomes an asset.
The same with your house - if you rent it out or rooms within it out to at least cover costs then congratulations you have an asset.

So I am training my mind to think about everything as a cash-generating opportunity (in terms of business). Such as can I write and e-book to keep selling. A zero cost asset (potentially). Stocks and shares are interesting. I usually look for the ones that will generate revenue and ongoing dividends over the life of the share. This then becomes an asset. Usually over a 10 year period the shares will have paid for themselves through dividends. etc.

If there are any great ideas about low or no cost assets then let's hear them.
Cheers,
Richard.
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ph_germanaz - 7/12/2009 10:27:05 AM
@ Richard
.

Richard, feel free to use our "white envelope" icon to discuss your ideas (deep further) with interested members.

Best regards,

Phil
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DavidJ - 7/12/2009 4:17:23 PM
Continue to Educate Myself
Robert, Sir. Thank you for allowing me to share in the development in this book albeit in a very small way. I am 63 and I am reliant on mutual funds for the lion share of my income. Since the market crash I have realised that I have to develop other income streams to enable me to invest for my golden years.
I have a gifting for picture framing and this supplements my income but I need to develop other income streams.
It would be difficult for me to obtain finance from a bank to purchase property so therefore I need to educate myself on things that I can do as a small business owner and then invest this income. I am currently educating myself on the Internet economy and learning how to develop and be the administrator of my own e-commerce website. It is a long haul but at least I am educating myself.
I have always viewed a franchise as a way to create an income stream but have been hesitant because at my age and the little spare cash I have. I have one chance for this type of venture to work. I understand that it is dependant on me putting in the time, effort, mindset and investment but Wow a R300.000 loss right now would be a killer.
So I will continue to explore and educate myself in opportunities that will allow me to increase my cash flow so that when the opportunity is presented I will be prepared and recognise it.
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mingseng - 7/12/2009 5:56:23 PM
Capital Gains vs Cash Flow
One of the most important lesson I learnt in this book.

Sometimes the emotional buying in hope of capital gains is still there because looking for capital gains asset is easier. Hence need to be focus on my objective.

I'm looking to convert my second home into cash flow generating rental property. Together with my other 2 rental properties, the cashflow generated I will use it to buy silver to build up my commodity asset class as a hedge against inflation.

For stocks, I've already hv some high dividend paying shares which is giving me quarterly or half yearly cash flow. I intend to build on increasing the investment to increase the cashflow. Besides, I am learning options trading so that I can add another stream of cash flow from the paper asset class.

Still a lot to learn from all the masters out there, like one of the chapter where Robert mentioned how quickly an asset can turn into a liability. I had a learning experience recently when my tenant quited due to the economy crisis. It turned my rental cashflow from positive into negative. Never stop learning! Gee...I'm loving the challenge :P
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