This week we ask: What are your investing goals? Maybe you're looking for cashflow, an income stream, appreciation or a net return. If this applies to you then make sure you don't miss this episode as we'll be learning how to find investments that fit your criteria and how to use them to achieve goals going forward in your investing career. The Passive Investing Playbook - https://theinvestormindset.com/passive
This week we ask: What are your investing goals? Maybe you're looking for cashflow, an income stream, appreciation or a net return.
If this applies to you then make sure you don't miss this episode as we'll be learning how to find investments that fit your criteria and how to use them to achieve goals going forward in your investing career.
The Passive Investing Playbook - https://theinvestormindset.com/passive
KEY TAKEAWAYS
1. Make a decision and get clear on what your investing strategy is. It could be cashflow, appreciation or a blend of both.
2. You can offset some of your income by investing in a property that produces regular monthly cash flow.
3. Appreciation will typically give you more risk but provide a higher ROI. Great if you don't need an income stream but want a longer term investment with bigger bulk returns.
4. A hybrid strategy means investing in cash flow and appreciation returns together. This means you can start building a nest egg for the future but also have some monthly returns from your investment.
BOOKS
The Passive Investing Playbook - https://theinvestormindset.com/passive
LINKS
Learn more about investing with Steven at
https://theinvestormindset.com/invest
Title: E131: Clear Investing Goals: Investing for Cashflow or Appreciation - Steven Pesavento
Host: Steven Pesavento
Duration: 13:41
Narrator (00:00):
It's wonderful that so many of you have stepped up and registered to partner in future multifamily opportunities together. We follow a very strict vetting process when selecting our operating partners, and all of which have a serious track record, at least five years of experience, at least 2,500 doors that they've actually managed and owned and over $250,000 of assets under management. These kinds of guidelines help make sure that we are investing together in some phenomenal deals and you can learn more by registering at theinvestormindset.com/invest. These institutional style investments bring benefits to busy professionals and real estate entrepreneurs looking to reduce their taxes and increase their returns. And you can join us by getting started at theinvestormindset.com/invest. I look forward to seeing you on the next deal.
This is the investor mindset podcast and I'm Steven Pesavento. For as long as I can remember, I've been obsessed with understanding how we can think better, how we can be better and how we can do better. And each episode, we explore lessons on motivation and mindset for the most successful real estate investors and entrepreneurs in the nation.
Steven (01:17):
Welcome back investors, we've got a good episode today. We're going to be diving deep into understanding your investing goals. What are you investing for? Are you looking for cash flow and income streams, or are you looking for appreciation, the opportunity to increase the net return that you're going to see on your investment? Or are you looking for a hybrid, a blend of the two? We're going to get into details on each of these and talk a little bit about what might be best for you so that you can start making those decisions and start keeping an eye out for investments that fit your criteria and start making some, some clear goals for yourself in your investing career. And going along with today's series, we have put together the ultimate passive investing playbook. It's an ultimate guide on passive real estate investing really laying out the foundational pieces for you to understand how to make the right decisions and build the right goals for you and yourself in your real estate investing business. So if you love this episode, if you want to go deeper, I highly encourage you to head over to the investormindset.com/passive, and you can get the Passive Investing Playbook. It's a 10,000 word, deep dive book that can be sent to you right away and you can start continuing your education on this path and, make sure you check in each week as we're going to continue to release more nuggets from this guide, that's really going to help you lay down the foundation so you can make the right decisions in your investing. Let's get into it.
All right, guys, welcome back to this week's mindset minutes episode on the investor mindset podcast, and I'm your host Steven Pesavento. Each week we share mindset tips and investing strategies to help take your investing career to the next level. And this week we're focused on, Getting Clear On Your Investing Goals, Investing For Appreciation Or Cashflow Or A Hybrid Of The Two. Join us each week as we share more tips and strategies to help you reach true financial freedom through real estate, by hitting that subscribe button and making sure that you don't miss a single episode.
So when I was getting started in my investing career, I didn't even realize that I was investing, but I was building out an Airbnb business where I had multiple short term rentals that I had mastered, leased and furnished. I was renting those on a daily or monthly basis and I was receiving cash flow from those investments, right? So I had put money up and I was managing that business and I was receiving cash flows consistently on a regular basis and it was phenomenal, I was making a lot of money. Fortunately, they changed a lot of the rules and therefore I changed my focus in the investing game. At the time, like I said, I didn't even realize that I was real estate investing until I had gotten full time into flipping, which is the opposite end of the spectrum. It's focused fully on appreciation - buying a property, putting in money, increasing the value, and then selling that property on the back-end for a nice return, for the upside on the back end. And I was making great money and have been making great money and flipping, and it's been phenomenal. But one of the downsides that I realized as I was focused on just appreciation was that I wasn't receiving consistent income, consistent cash flows that were coming in my business. There were big chunks of money that were coming in and having to make decisions based on whether or not those would come in on a regular basis and it ended up making me realize that there's gotta be a great blend of the two. And how can I take advantage of both? Right. So I've made a shift and, you know, as many of you guys will make shifts in your investing career, to really focus on kind of a hybrid of both of those options. And it's been doing really, really well for me because one of the things I like is just being able to know that I've got some great income coming in. But of course, being able to see those big chunks, those big wins, that can sometimes happen, just not as big as some of the ones when I was focused just on appreciation.
So let's get into cash-flow, let's talk a little bit about what cash-flow can do for you, and let's do it from this perspective of, telling a little bit of a story about this person, John. John is a full time executive, he's making great money in his business and he's got a big family. His goal is really to be able to create an income stream, to be able to offset some of that income that he's making in his job, so that he can spend more time with his family, so that he can spend more time focused on other things in his life other than just his current role. And his real goal is that he can either step out of a full time role altogether, or step down into a part time role. So, looking to kind of reduce those hours to spend more time with his family and so his goal, just for this example here, is to generate $4,000 per month in cash flow. And, you know, if he can do that through passive income, then he'll be able to take on that part time role and give him more time with his family, right? So, when he's reviewing investment opportunities, he's going to be looking at it through that lens of knowing, okay, well, I want to create an income stream. And so if he backs himself into it, he's able to see how much money he really needs to invest in order to create that income stream. So as he's doing his research, he starts to learn that in the multifamily space, you know, he can see a return on cash flow of 6 to 8%. You know, obviously, every single deal is different, but he knows that that's a good number for him to back into. And in order to receive that $4,000 per month or $48,000 per year, he realizes that he is going to have to invest at least $600,000 into an investment and an 8% cashflow that's going to kick off $60,000 per year, at 6% cash flow obviously is going to be closer to that the number that he has minimum targeted. So when he's putting together his investment goals, he knows that he needs to be focused on an income stream because that is what is in alignment for him.
Now on the flip side, from a totally different angle, Brady is making a phenomenal income in his business. He's making a lot of money in his everyday job and he doesn't need an income stream, he doesn't actually have any interest in income streams. What he is really focused on is how can he have the highest return on every dollar that he has invested? How can he make the most percentage, how can he see that equity multiple grow as quickly as possible? And he's okay taking a lot more risk because with cash flow, of course, you're getting that money coming in every single month, you know that, you're seeing that return. It's more of a stabilized type business or asset typically. And so for Brady, he knows that he's making great money and all he cares about is that long term return that he's looking to see whether he doubles his money in a year or doubles his money in five years or 10 years for him, it's all about that return number. So he is focused primarily on appreciation, and he doesn't mind taking the extra risk because, when you're focused just on appreciation, typically people will say that appreciation plays are more risky than cashflow plays. And so he's going to be looking at investing in markets that are big growth markets like New York or LA or Austin, or maybe even Denver, some of these places where it's very expensive to buy a property, but the property is typically appreciate. And so even though it's a little bit of a gamble, he is happy to take it because if he loses out, he's okay with that because he wants to spread that money across multiple appreciating assets to have the biggest opportunity at growth. He's looking for that bigger opportunity at growth and it's a great strategy as long as he's okay with the risk and he's okay losing money, but he's also okay making a lot more money going that appreciation route, right? Appreciation is flipping houses, appreciation is development. It's value add deals where you're going to go in and add value to a property and then look to sell it for a higher, higher number in the long run.
Then there's a third type, which is more of a hybrid type of investment strategy and that is where you're focused on cash flow, as well as having appreciation. You know, it's the best of both worlds, this is the way that I personally invest. All of my money goes towards investments that have a little bit of both. Now, sometimes I might go the appreciation route cause I'm okay taking a little bit more risk as long as enough of my portfolio is in more of a safe place but, I like the hybrid approach because it gives me income in the short run, that cash flow that we're talking about. And it's a little bit more conservative because it's more of a stabilized asset, but then I've got a little bit of a value add maybe not quite as big as I might look for on appreciation play. So, it's the blend of the two and, you know, a lot of experienced investors have landed here cause like, once you've lost money on appreciation, maybe you realize that your risk profile isn't quite what you thought it was. Or maybe you're only focused on cash flow and you're not seeing that growth that's been happening in the market and you really want to see some of that growth so, you're looking kind of for a little bit of a blend.That's why I think it's the perfect, sweet spot for me. And, you know, for a lot of the investors that we work with, you know, in our deals, is really looking for how we can return both cash flow and that appreciation over the long run of that hold.
But at the end of the day, no matter which of these choices you choose to focus on, at the end of the day what is most important is that you make a choice, is that you make a decision. And, before you make that decision, you want to get clear on, you know, what is possible and why could this be the best route for you and your investing career? So that's exactly why, you know, becoming educated on, should I be focusing on cash flow or appreciation or maybe a blend of the both can be a really great option. And as I mentioned at the start of the show, remember that we've put together the ultimate passive investor playbook. An ultimate guide for diving deep and understanding all of the pieces that you need to know to get started, to start making these decisions on what is the right avenue for you to go down. And you can of course get that, it's in the show notes down below or, or on your podcasting app, but you can go to theinvestormindset.com/passive in order to get yourself a copy of the ultimate passive investor playbook. It's over 10,000 words. It's the deep dive on a bunch of different topics with some great questions that you can ask your general partners if you decide to go down the route of investing in syndication or, or learning a little bit more about it.
So if you guys have questions, please, shoot me an email head over and follow me on Twitter, LinkedIn, Facebook at Steven dot Pesavento. Shoot me a message and let me know if you've got any questions about any of this stuff, because this is what I've dedicated my life to is how can I help other people reach financial independence and freedom through real estate? How can you create the life that you desire through real estate? And frankly, it fills me up inside to know that I've helped somebody make some of those decisions or go down the right path and I'm getting messages all the time and I'm happy to respond to those. So, I'll leave you as I always leave you, to remember to live a life worth inspiring others, and you can do so today by spending a little bit of time getting clear on what your investing for, and then taking action on that and going out and applying this in the world and starting to build that little bit of a nest egg towards financial freedom so you can live the life that you really wanted to live. Thank you guys so much, and I'll see you on the next episode.
Thank you for listening to the investor mindset podcast. If you like, what you heard, make sure to rate, review, subscribe, and share with a friend, head over to theinvestormindset.com to join the insider club, where we share tools and strategies from the top investors and entrepreneurs and how to take it to the next level.