Investing for Cash Flow

Most millionaires share a common strategy, and it’s no secret – they focus on building multiple streams of income. 65% of millionaires have at least three income streams, and nearly a third of millionaires have five or more income streams.

Generating regular consistent cash flow is the single best way to build wealth.
Investing for cash flow has numerous benefits and can propel your investment
strategy to provide richer returns. Building up substantial income-producing
assets puts your money to work for you and will gradually allow you to not have
to work for a living.

“Never take your eyes off the cash flow because it’s the life blood of business”

Richard Branson

Cash flow is king

Cash flow gives you financial flexibility and
can help reduce portfolio risk. You can reinvest the cash, build up a financial
war chest, and explore other investment opportunities. You aren’t tied to the
single cash flow investment, and placing your money in a manner that returns
regular cash gives you the freedom to explore other potentially lucrative
options.

From a retirement perspective, it is much
better to have a regular steady income than a potential capital gains payout
that could be rocked by market volatility. Investing in assets that pay you
back reliably over time is oftentimes safer than investing in assets that could
turn out to actually be expensive liabilities in the end. In cases where you would
have to choose between a high inconsistent return or a lower consistent return,
it generally makes more sense to go with the more guaranteed payout. Knowing
that you will receive money on a set period allows for better financial
planning.

Your income-to-debt ratio is an extremely
important financial signal for lenders to give you access to additional
leverage. Showing stabilized cash flow returns on income-producing assets
counts towards your income, and can, therefore, give you access to even more
money to help grow your wealth (hopefully by investing in more income-producing
assets!).

Cash flow investments don’t rely as much on
timing the market. There is still some risk involved, but there are many ways
to mitigate that risk. Hedging against market volatility and diversifying into
alternatives that provide regular cash returns is an important strategy to
maintain financial health in turbulent times.

Types of cash flow investments

There are many ways to invest for cash flow.
Some examples are real estate, buying a business, utilizing a high-yield
savings account, peer to peer lending, and dividend stocks. Here at Upside
Avenue, we believe that real estate is one of the more attractive options. Real
estate is an alternative asset class that is generally non-correlated to the
stock market and generally provides both cash and appreciation returns.

There are many ways to be involved in cash
flow investing in the real estate industry. Investment properties come in all
shapes and sizes and the deals are generally only limited by your creativity.
Some classic examples of income properties are multi-family units, apartment
buildings, trailer parks, short term rentals, vacation rentals, farmland,
timberland, REITs, and more.

When placing money in real estate, you have to
understand your numbers and make sure that you are getting a proper positive
cash flow return. Below is a simplified example of a deal that shows
significant cash flow.

Number of Units: 50
Monthly Rent per Unit: $1,000
Total Monthly Rent: $50,000
Expense Ratio: 40%
Expenses: $20,000
Net Income Per Month: $30,000
Reserve Ratio: 5%
Reserves: $1,500
Free Cash Flow at End of Month: $28,500

Now that free cash flow at the end of the
month can be reinvested or used to fund your lifestyle.

No matter the market timing, there are always
deals to be found in real estate. Underwriting the deals properly is the single
most important thing you can focus on to ensure consistent cash flow returns.

Cash flow is important, and now
more accessible

As we have seen with recent coronavirus events
– equity markets tumble due to uncertainty and global supply chain constraints,
consumer spending halts on non-essentials, and massive amounts of wealth get
erased overnight – alternative asset classes that pay you reliably can be the
diversification that your portfolio needs to withstand times like these.

Upside Avenue provides a low barrier to entry
for investors looking to benefit from real estate as an alternative asset
class. The professional underwriting team, impressive historic returns through
market cycles, and risk mitigation through scale that Upside Avenue provides
its shareholders is an attractive option to stabilize your portfolio.