Why cash flow won't make you wealthy (and what will)

[@ShelleyfromCali]

VGT is up 1200%! Real Estate requires lots and lots of time and money! You need to factor TAXES/INSURANCE/MAINTENANCE!! If you want Real Estate you better have deep pockets! Plumbing, AC/Heat System/Electrical/upgrades!!! It's never ever ending! Sold both of my properties and invested in ETFs and good blue chip companies! I make more money with way less headaches!

[@Mitchell.Holland]

The way I think about it - as an appraiser, realtor, and homeowner - is that the S&P 500 does its own maintenance. Houses don’t. When a company underperforms, it gets dropped. When your roof underperforms, you’re out $15k.

[@knockoutlightz]

Why not both? Why chose to be poor? Be rich my man?

[@ShelleyfromCali]

@@knockoutlightz $1.4 million is poor? Salute my friend!

[@year1929]

Good point. I always wanted to buy more properties until I realized the headaches of managing them is not worth it. I also didn’t understand the “roots” analogy made in this video

[@henrymitchell9717]

I lost a lot chasing individual stocks and I feel pretty stupid for not understanding how investing works. I have a double major in economics but I’ve been trying to make sense of the market. Well done on profits!

[@RomanFranklin-lr3ri]

I just read the article “Why Cash Flow Won’t Make You Wealthy”, and it really changed how I think about investing. Cash flow isn’t the end goal; it’s just a tool.

[@ArianaFelicia-cw7oq]

Exactly! Too many people focus only on cash flow, like rental income or dividends, but ignore building long-term wealth through capital appreciation.

[@FedrickWhite-jo2ed]

That’s a great point. The article highlighted that relying solely on cash flow could keep you stuck if you’re not reinvesting or growing your net worth.

[@JoshuaMartins-sr7ez]

Right, because cash flow might cover expenses, but it doesn’t necessarily increase your overall wealth. Assets that appreciate over time often have a bigger impact.

[@DionTalkFinancialFreedom]

Cash flow set me free. I’ve never touched equity. No heloc. No cash out refi. No sale for 1031. I invested for the right amount of cash flow from the least amount of units.

[@Robuilt]

Well first off: Congrats-that's pretty amazing! Second of all: I love cash flow. Lastly: All I'm really saying is that true wealth in the long-term will come from appreciation, paydown and tax benefits working in conjunction with cash flow. Cashflow is amazing, but I think people really fail to realize that the other 3 levers of real estate can be far more powerful.

[@byronrogers4489]

Words of Wisdom from THE MAN who clarified "cashflow" for me. I agree man!!

[@Dimrain13]

@@Robuilt Thats what I took away as well. It sparked me looking back at selling my first flip to see what its worth now vs when I sold it. Sure I made 60k which was nice, but I didnt need all of that. I could have gotten by renting it out instead. Now instead of 120k its worth around 170k 4 years later. Its not in a great area, but that is 50k less than I have now. This might also make me consider keeping a current rental instead of selling it.

[@usa91787]

Cash flow keeps a business alive.

[@slin4013]

Yes. Let’s not forget that. CF is critical

[@davidstephens9594]

I left my w2 job in 2018 after building up a few rental properties, and by the grace of God, I've been living 100% off my rental properties for 6.5 years now, along with growing my rental portfolio. My goal was to live 100% off of the cash flow, but truth be told, I've done some refi cash outs to supliment my monthly cash flow so it takes cashflow plus some equity harvest to live off of these rental properties which I'm ok with.

[@andresmattos7541]

God LOL

[@dominickgalinis3210]

I love real estate as much as the next person, but I feel like you’re trying to straddle the fence here. $40K downpayment on a $200K home. That home will appreciate to around $746K after 30 years. (Rule of 72. The house will double every 16 or so years with a 4.4% appreciation per your video.) If you put $40K in the S&P, averaging about 11%, after 30 years that money would be worth around $1.068M, or $322K more than the home. That gap also doesn’t include the time it’ll take to save up for the down payment, and the fact that you can invest smaller amounts into stocks. It also doesn’t include the money needed for repairs and maintenance.

[@bmxracer2701]

Your model does not include th cash flow earned each month with the property or the tax advantages.

[@itsmekristy]

​​@@bmxracer2701I agree and I would rather be a little more conservative on the S&P but even then the numbers are just to similar/close. Rental properties seems like much more headache for about the same benefit of S&P imo.

[@Robuilt]

Hmm it's an interesting argument. Keep in mind, this isn't me disparaging stocks. I'm all for any level of investing. With that said, as someone pointed out down below, the cashflow of a rental is where the tides turn a little bit. Additionally, you can leverage your rentals to buy more rentals. So for example, you can cash out your equity (after you've built it up) and use that money to buy another property. You can't really do that with stocks (well you can do options or futures, but that is relatively risky and quite the gamble). On top of that, stocks are liquid. But you will have to pay taxes on any gains you take. Of course, this is the same with real estate. HOWEVER, there are a lot of strategies to defer/offset said taxes. And once you get into the REAL good stuff, you can do things like cost segs to offset your w-2 income. There are just so many ways real estate can easily overtake stocks. BUT, you have to work your ass off for it. It's not passive like stocks. It's not set it and forget it like the S&P500. There's so many sleepless nights and ruined holidays. Ultimately, there's no right or wrong. Just what's right for you! Thanks for the comment.

[@dominickgalinis3210]

@ correct. But if the convo isn’t about cash flow then it doesn’t matter. Also, like I said in my post, you won’t just magically get $40K, it’ll be over time. And since you can invest less dollar amounts in stocks, it’ll increase the gap that will probably make up for tax benefits.

[@itsmekristy]

@@Robuilt Another great point here. 1 house probably doesn't make sense but maybe at 3 or 4 it becomes a better option than just S&P.

[@anthonydooley3616]

Real estate and stocks are not an apples to apples comparison because you cannot borrow long-term money to buy stocks. You also don't get monthly cash flow that you control with rent increases and there are no tax advantages to buying stocks. Real estate is a business and stocks are not. Cash flow can make you wealthy if you reinvest that cash instead of consuming it.

[@FloraBamaGoneWild]

Just closed on my third rental, today. STRs & MTRs. It’s great! I’m broke as fuck BUT I’m becoming rich in real estate 😂😂😂😂😂

[@Robuilt]

Aw yay! Congrats! Three is HUGE. The best millionaires are "broke" :)

[@FloraBamaGoneWild]

@@Robuilt FACTS. 🎉

[@jjharrison4099]

Same 😂

[@steveshow-tos5394]

Congrats on getting your third rental! I only have one currently. But it’s nearly paid off and Im starting to think about leveraging its equity to snag a couple more over these next few years if the market cooperates.

[@evandently9474]

Part-way through renovations on #2 and #3 right now. Broke and Rich! 🙌

[@gangsta8929]

“Caveat here: the rate of appreciation has fluctuated significantly over time………bla bla bla” I really appreciate the thorough analysis here. A lot of creators would just use an average number that misrepresents what happened. Adding in that thinking about it anymore is a waste of time really takes it to the next level.

[@lauriekline8655]

Long-term rental investor here and I have to say there are not too many investments or someone else buys them for you and this is literally the beauty of real estate with the mortgage down by the tenant they’re paying for your investment. It’s truly amazing.

[@charleskayser4646]

Great production value on this video! I love the analogy of the fruit tree

[@fillbillydeluxebredmon7904]

Rob, I’m definitely a fan of your channel. But I have to call you out on an earlier video involved with the equipping your Airbnb. Your direct link for the queen size bed frame was a total total bust. I bought four of them for two units and within six months two of them. We’re destroyed. The other two are barely hanging on. Really enjoy the content but make sure you vet what you recommend for us. We’re counting on you.

[@tymoed]

Cashflow won’t make u rich but it sure does help, equity is what would make a regular guy rich in my opinion.

[@Robuilt]

100%. I get it haha. I love cashflow. It's how I buy things 😂 But the moral of the story is true wealth is built through appreciation, debt paydown and tax benefits :)

[@808jayrealestate]

Actually it can make you rich if you use the cash flow to drive down the debt faster and pays straight to the principal. You’ll pay less interest and thrive faster to wealth while someone else pays for your future vision😬📈

[@djordjejovanovic2315]

Very motivated video and very nice explaining!

[@MrJason0505]

What an amazing video Rob. Keep them coming brother. Once I’m done building my Airbnb village, Ima fly you out to see it. It’s going to change the game.

[@Teltic2007]

Would you purchase in a small town, higher cash flow…. But maybe less appreciation? Or Big city, less cash flow, but more appreciation?

[@Bruceman17]

James and the Giant Peach! One of the best movies from my childhood! Nice one and Great Video!

[@khamisinorwood5889]

What if you at a HELOC structure to you scenario? Then you’re really winning! Great video. Thx!

[@lengerer]

The growth of property in America is interesting. Here in Australia or property doubles every 7 to 10 years. Unfortunately this has made it almost impossible for the average person to now own a home. For a new investor in Australia i would say didn't bother with property and just invest small amounts into the stock market until you can afford to buy a home to live in.

[@Yurkevich22]

6:00 - WTF - Install a crematorium?? and then pretty sure it says "host break dance competition?" - what are those levers exactly lol??

[@RJBiteanerd]

I think in some places there's bizarre laws around death and the property that change the taxes and whatnot. Trump did something like this at one of his properties.

[@808jayrealestate]

Actually cash flow can get you on the path to being wealthy. If you chunk the cash flow to the principal or your heloc you used for the down payment. The debt pay down thrives faster and even deeper. The thing is, people like me become so passionate about real estate that we want to use the cash flow to replace our W2 so we have more time to spend on real estate investing which is addicting😆🤑📈

[@BaosDad]

So my question is I have about $98k left in my property left and I’m thinking to pay that off in 3months or buy another investment property that’s worth $200k ( this will have positive cash flow ) Please let me know what you would do.

[@JakeRichardsong]

Ideally, and yet, all real estate does not appreciate as much as the example provided around the three minute mark.

[@CharliniAlmeida]

Cash flow is great ...if one can keep / maintain it and not spend it all 🤓🙌

[@tas6s]

And if he doesnt pay? If make problems to fix? Costs... If nobady rent it???

[@Robuilt]

Paying rent and finding tenants to do so is the premise of real estate. If this worries you, real estate may not be the route for you. On the flip side, stocks are FAR more passive. Might be better for you to pursue that avenue!

[@InvestingwithBishop]

Should also buy BTC ;)

[@MacTac23]

I have 7 doors and I live in a 5th wheel camper 😂 It'll come someday.

[@MrJason0505]

Mac I have two doors and I live in a little cabin on my land and building 5 more doors 😂! It will come for both of us brother!! Have faith

[@jenniferw9951]

It's already on its way!! You're living now like others won't so you can have a future that they can't even dream of!

[@Pseudify]

The one thing I think he missed here is that paying down a mortgage is not necessarily a good idea. You can leverage your first property to buy more properties. If your mortgage payment is, say, 6% and you can earn 15% on a new property, you’re best off staying in debt.

[@TheFirstRealChewy]

Whether you do stocks, real estate, crypto, art, etc, the concept is the same. Own things that sustain or grow in value with time. When you own stocks you own a share of a company. This means you can also own shares of a real estate company. Invest in whatever you want, just make sure that the type of investment aligns with you.

[@SuperApe3030]

Cashflow = Mortgage But what about all the hosts that are paying costs via w9 income because of airbnb bust?

[@tdudud]

Does having around 35k in savings for an fha down payment not matter if your yearly income is only around 30k? Looking to house hack my first property within the next 2 years. Love your channel!

[@MomoTheDisciple]

Talk to a lender

[@penguingobrrbrr353]

Does that works in ETFS ?

[@Robuilt]

What do you mean?

[@penguingobrrbrr353]

@@Robuilt does the growth happens the same way in the stock market or its mostly working with the real estate properties in terms of debt or its best to avoid debt when you invest in the stock market?

[@timmy23apsb]

Diddy Parties did not go unnoticed 😂

[@Robuilt]

😂

[@kimioapps3536]

...but what if I like the "dead" smell.

[@grahamlawlor8361]

I swear I've watched plenty of your videos in the past where you preach about "return on equity" - aka remortgaging your property to pull out cash to fund future purchases. But doing this is the opposite of what you preach in this video - letting renters & guests pay down your mortgage to zero. So which is it?

[@MrJason0505]

The answer is both. Depends on your situation.

[@Robuilt]

Hmm I am not sure that this video contradicts the idea of return on equity. If anything, it would reinforce it. Build crazy equity in your rental, cash out and use it to buy another property in which you can build massive wealth. No right or wrong here. Just what's right for you.

[@sihlemasondo2898]

Real estate is good only problem is its capital intensive

[@WealthyChronicle]

Can we just talk about how real estate grows like a tree? 🌳 I’m loving the idea of letting my wealth grow down before it grows up!

[@imdoc7872]

I use RE to offset my income. I prefer to invest in the market for big opportunities and gains. Ive never been called by my stocks to fix a roof or a toilet. I also know several people in RE who got wiped out in 2008 and never recovered and never became wealthy.

[@KBWFreedomthrurealestate]

Mindset is key!

[@Jojo.255]

How many units is this? Ooh you are probably regular market rent not HUD

[@Robuilt]

What do you mean?

[@robertoreilly6660]

With real estate, I can actually do something to increase the value of the asset. No such option with equities or crypto, etc.

[@dennisnoone7427]

A lot can happen in 30 years, there are some risks there, for me I would rather own it out right and collect 10% on my money, get tax write offs and get some appreciation as well, if something will change i would sell or exchange into a different market

[@randyparlor5953]

I've known two men who each owned thirty rentals, and also held full-time jobs with pay similar to mine over a thirty plus year careers. Via investing in no-load low-expense large-cap, mid-cap, and small-cap stock index funds I've accumulated as much wealth as they did over my twenty-seven years of investing without any of the administrative, maintenance, repair, tenant, and goverment red-tape hassles they've had to endure. Their path was for them, my path is for me. I'm happy with it and its still working for me through retirement.

[@natdus05]

I’m with you on this. I don’t want to work two jobs for the next 10+ years. I rather keep learning about the market and investing in it long & short-term.

[@ericwilliams952]

25 years been doing exactly what you’re preaching. Buy one paid off by another one.

[@braystar1782]

Stocks have the same power of leverage as real estate.

[@duneme]

I agree, adding a Chipotle to your Rental will increase its value! LOL

[@addisonbaker9718]

4:58 nice improvements

[@LowOutput]

lol bathroom cameras

[@MOHDFAIRUZBINISNANJKR]

Good

[@snagslewis30]

Thank you.

[@Robuilt]

You're absolutely welcome. Thanks for sticking with me.

[@snagslewis30]

@@Robuilt wondering what you think of jefferson county wv,Summit point, Harpers ferry area for Abnb?

[@Robuilt]

@@snagslewis30 truthfully I don’t know too much about those markets. But I’ve always been super interested in Harper’s Ferry!

[@jordanherrmann9584]

“You can’t eat shingles” my wife and I realized one day as we took a good look at our situation. We had focused only on net worth and re-invested every penny we earned in real estate which turned out fantastic except we were flat broke! Thankfully things have panned out. I enjoy your videos and outlook. Thanks for making them and sharing with us.

[@Ohnoudidnt03]

Really "squeezing" every *drop* of "juice" out of the fruit tree metaphor 🌳🍎

[@Robuilt]

This tree still has more to give.

[@justinproffitt6149]

For the stock people out there. Example: investor purchases single family rental home for 350k with 25% or $87,500 (conservatively) to make it cash flow positive. 10 years later at 4.4% appreciation the home value is 538k. Next you sell and 1031 exchange taking home around 300-350k. You take the 300k buy an apartment complex with 1.2 million that cash flows (say $300 unit x 10 units=$3k cash flow). Finally, in 10 years after an investment of 1 property at 87,500 you end with a 10 unit 1.2 million dollar apartment complex cash flowing 2-3k a month. Yes, its more work than stocks but much faster. Stock compounding doesn't really take off till 25- 30 ish years in the market.

[@briandeluca6908]

Your trying to presnt this info while pretty much contradicting yourself. You say you get the extra money aka cash flow bro. You literally said it was important without directly saying it

[@byronrogers4489]

With cashflow, wealth is irrelevant.

[@aldofazio1159]

Installing a crematorium? That's a real niche, or say!

[@matthewsheets8115]

This guy is out of touch. 4% compounded annual return is terrible. And depreciate a rental property? Why would anyone do that? When it comes time to sell and you make a profit above its depreciated value you definitely have to pay back the difference.

[@adamwilson301]

Sounds like you don’t know anything about real estate, borrowing, leverage, depreciation for tax benefits, 1031 tax. But keep commenting on videos like you’re a trillionaire financial guru everyone should listen to.

[@matthewsheets8115]

Not really looking for an argument. It’s basic math though. Also I’m in Canada so the tax laws here as somewhat different, both most general rules apply in both countries. If I depreciate a property on paper, collect a tax deduction, then sell the property down the road for more than its depreciated value, then clearly the property didn’t depreciate. Example: buy a tractor for 100,000. Depreciate it down to 10,000. Sell it for 50,000. Well, there’s a 40,000$ discrepancy. When you file your returns the governments gonna want those tax dollars back. It’s called a “recapture” in our income tax act. Can’t speak to the IRS tax code but I highly doubt Uncle Sam will let that slide. Leverage is pretty straight forward, but it works two ways. On the way up and on the way down. I never claimed to be a guru. Sorry if I hurt your feelings champ.

[@davidacosta8060]

👍

[@929cosmodude]

if only youtube showed the dislikes still 🤣

[@Betancourts]

THIS IS A FOOL WHO OWNS NO STOCKS. Maybe buys 1 house and suddenly he gives advice.

[@DaysenSouth-z5p]

The clickbait got you a dislike instead of what you wanted fool.

[@starshockey11]

I own over $4.0 mil in real estate and only cash flow about $75k per year due to rising costs. But I also have over $1.5 mil in equity. I do think cash flow matters but the meat for my approach is the value of the dirt itself over time (like a stock portfolio). The cash flow is simply a means to mitigate risk and overcome the down turns in the economy, maintenance, etc. Some people think I'm crazy because I have a modest W2 salary of 200k but have over $2.0 mil in debt but if the market performs the way it has the last 30 years and I do nothing but maintain the property/ notes I will see no less than a $6.0 million positive return on the current portfolio as is. The cash flow is just the gravy and means to get there for me!

[@bmxracer2701]

So at retirement time or etc. What's your strategy? Cash out? Live off cash flow? Or..?

[@Teltic2007]

“Modest W2 salary of $200k” 😂

[@starshockey11]

@@bmxracer2701 If cash flow increased closer to 200k per year we would likely hold onto the properties. Or cash out if our other investments (stocks) weren't enough to support retirement. I also think if you have a ton of capital (over 2.0) then sinking into commercial side is very appealing. My wife and I have considered both avenues and will have to cross that bridge when the time comes but we are definitely thinking long term

[@starshockey11]

@@Teltic2007 In 2024 at age 33 it feels very modest hahah. Never would've said that 5 years go tho!

[@jtob5032]

Conveniently excluding the cost of owning the property. Investing in property literally destroys cash flow. The "average annual appreciation is 4.4%", what a joke. First of all, 4.4% is crap, even if you can leverage you money by borrowing. Also, once again, not factoring in the actual cost of owning the property.