Most real estate investors simply don’t realize they’re sabotaging their retirement. They don’t understand the timing of capital growth vs cash flow.

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Transcript:   When investing for retirement, people tend to think about building their net worth, that that makes sense on the surface. Here’s the problem with that. When you’re retired, you don’t spend your net worth. When you’re going to get the groceries for the week, you don’t give them a slice of your pie. What you do is you give them whatever cash flow you’re coming in and whatever they ask for, you just give it to them. Net worth generates cash flow. What you have to do when you’re a younger investor, when I say younger, that’s a relative point of view in concept and that you might still be young when you’re 50 because you know you’re not going to stop working for 15 or 20 years. On the other hand, I have many people that are clients, 35 to 40 years old and they want to retire by the time they’re 50. They need to get on their horse. It’s makes my job a little tougher because each decision carries a little more weight. One of the things you want to make sure you get right is the timeline you have versus what makes sense to put first. Cash flow doesn’t come first. Capital growth comes first. Cash flow is merely the yield that you finally get in retirement from your capital that you grew. If you have a net worth of 2 million in retirement and you’re making 10%, you’re making $200,000. It’s not that the guy with one million gets a lower yield, he’s making the same 10% you are, he’s just making half the money because he has half the net worth. Growing your capital as a young investor also makes more sense because you don’t need cash flow now. You’re investing because you have more cash flow than you know what to do with. The idea is grow your capital while you’re young. Keep growing it. Do the things that keep that capital on an upward trend. Sometimes that’s easier said than done. I’ve gone through all kinds of good times and bad times. It’s times when it’s much safer just to go fishing for a few years. The idea is when you’re investing up till you get close to retirement, you want to grow that net worth as safely but as quickly as possible, the bigger, the better. Now, how do you do that in real estate investing? Because everybody says by cash flow, by cash flow. Well, you obviously want to have cash flow. Don’t go away saying, “BawldGuy says don’t get cash flow.” You want the property you but to pay for itself, you wanted to have some positive cash flow. The idea is to use your capital in such a way that you can take advantage of any upward movements in the market, value wise if it might happen. Now, when you do those analysis, never bake in any appreciation. I’m not telling you to do that. I’m saying position yourself such that if it should occur and we’re blessed by an increase in value, make it so that you own more real estate not less. You’re going to be using sufficient and down payment amounts but generally 20 to 30, 35%. That way, if something goes up 5% and you’ve got 25% down, you capital grew four times that fast. It went up about 20%. We’re going to talk about this more in other times. I want you to get this one concept today. That is capital growth comes first unless you’re retiring next year. You want to get the cash flow when you want it to be the biggest and most available and safest. That’s when you’re retired. You’re making enough money now.