Strategies For Escaping the Rat Race (Part 2)
Strategy #2 – The Cash Flow Strategy
CashFlow 101 has many real estate deal cards. You will encounter real estate deals whether you choose small or big deals. You will need to carefully analyze the deals as they are not all equally good. In fact, there are some bad real estate deals too. This article presents the strategy for escaping the rat race using only cash flowing assets in the form of rental real estate.
Build up cash reserves
Firstly you must build up your cash reserves to a minimum of your total expenses + $5,000. A word of caution here, some emotional intelligence is required for this strategy since you will have to ignore all the “wonderful” stock opportunity cards you encounter.
Select Small Deals
I also encourage you to only select the small deals initially, even if you are a highly paid professional. After you have made the $5,000.00 minimum, you will be ready to actively invest in a property. I suggest a 3 bedroom, 2 bathroom house as your first investment. Why? Because there are greater profits available should you encounter a unique opportunity to sell a property. Additionally, these properties tend to have better cash flow.
Use the Monopoly Formula.
I further recommend getting three or four of these properties then selling them and using the profits for big deal investment properties.
In keeping with part one of this article, I present the advantages and disadvantages of using this strategy.
1. Positive Cash Flow
Easily the most obvious upside of this strategy is the fact that it provides positive cash flow, thereby, increasing the capital you have available for big deals when you are ready.
Many of the real estate properties in the game may be acquired under the small deals with down payments as low as $2,000.00. Some may even be acquired without a down payment.
3. You can still make capital gains.
If you own rental real estate in CashFlow 101 and stick to the small deals then you may get some amazing offers for your properties. In my experience, better offers are made on 3 bedroom/2 bathroom properties and on complexes (4 apartment complexes and eight-plexes) than on single units or duplexes. You can receive as much as $100,000 in profit for each property if you encounter a unique opportunity card whilst holding your properties. This is why I recommend having three (3) or four (4) such properties if you are going to employ this strategy. Imagine a $100,000 profit on each of four rental properties, this will be a gigantic game changer when you now start taking big deals.
Another important note to make is that if you have more than one of the properties being sought by a buyer, you can sell all of them within the same turn repeating an enormous profit. This will put you well on your way to investing in big deals.
1. Pay Attention
You need to pay very close attention in analyzing the deals. Real estate deals are not presented as obviously as stock options in the game. You must be careful that you don’t waste your capital acquiring a property that is a bad deal. As examples, I have provided two deal cards from the game. Which do you think may be the better of the two deals
Put your answer in the comment box below.
Real Estate Deal Option #1
Real Estate Deal Option #2
The correct answer will be mailed back to you in response with the simple rationale.
I explain the basics of how to analyze real estate deals in this post.
You may need to spend longer in the rat race. Choosing this strategy may cause you to spend a longer time in the rat race depending on your experience in the game. You will need to build up sufficient capital in order to secure the down payment for the four rental properties. Add in the fact that you may end up acquiring other liabilities, getting children and the occasional downsizing and it becomes clear that this strategy is not for the hasty.
3. Refurbishing Cost are a B…..
Property ownership is not without it’s own unforeseen disasters. Your properties might become trashed by tenants, resulting in the loss of capital or you may be called on to provide new furniture. Your properties may also loose value or go unrented. In the worse case, a cash flowing asset may become an income draining liability, luckily, the latter is not a scenario I have encountered in the game.
Let us know what you think of this strategy. Read the other two strategies here and please let us know which strategy is your preferred route out of the rat race.Let's Get Social