REI Wealth Magazine, Issue #58 - Amy Mahjoory | Page 72

There are many articles in this magazine about “ building cash flow ” using rental real estate . This is a goal every real estate investor should strive for because if you want to build wealth AND support yourself with your investments , you need POSITIVE cash flow ! The interesting thing about building cash flow is that it becomes consistent and typically increases annually . It is similar to compound interest paid on savings accounts or reinvesting stock dividends . Unlike rehabbing , flipping , and contract assignments ( which are just “ jobs ” like any other JOB ), cash flow increases over time and allows you to be

rentals held long term . I prefer singlefamily homes for many reasons , but primarily because the management of these properties fits my personality . I typically have only 15­20 % turnover each year , which saves me a lot of cash flow from turnover expenses . Low turnovers also allow me to “ have a life ” and not be saddled with constant management ( Many years ago I controlled apartments on a college campus with 100 % turnover every year . I quickly learned that I did NOT want to live that kind of lifestyle ).
If you maintain a long­term goal of keeping your rentals “ forever ,” you will wake up one day and the loans will be paid off . Your cash flow will increase by years ?” We were both amazed !
Regarding the subject of risk , I believe your risk is low with the above scenario ( especially if you self­manage your own property ). A way your risk can be reduced even further is by distancing your name from your rentals and keeping it off the deeds in the courthouse . Privacy of ownership is the cornerstone of financial security . How do you do these things ? I hope I have made that obvious : Use a separate land trust for each of your rentals and real estate­related assets .
The second­best way to increase the cash flow is to “ be the bank .” How do you think banks make so much money ? They borrow from the Federal Reserve at
Image by Mohamed Hassan from Pixabay
“ free ” of the insecurities that most people experience when employed by others . It is truly a wonderful thing !
The big question regarding how to build consistent , reliable , and safe cash flow relates to risk . I have discovered after 50 years in the rental business that there are two primary ways to create positive cash flow . The first is through
500 % or more in one day and you will realize that all your hard work and sacrifice was worth it ! In addition , over time , your rents will increase due to inflation ( I remember punching numbers into my HP12C calculator in 1985 and telling my wife , “ Honey , can you believe that our $ 400 per month rentals will be bringing in $ 1,000 per month in 10 a much lower rate of interest than what they charge their customers and profit from the spread . I like this model , but the way the banks do it is too risky for me . If the borrower defaults , some type of foreclosure is required . Foreclosure is expensive , time­consuming , aggravating , and creates sleepless nights . I like sleeping .
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