Cash Flow is King

We all heard Robert Kiyosaki rhetoric. I generally dislike the guy’s methods, predatory seminars and the entire network marketing crowd. Though I must agree with him when it comes to his opinions on cash flow.

Say you are putting together a deal. Rental real-estate, a business plan or whatever your are trying to put together. It is important to take a good look at the cash flow projections.

Yes it’s great that you can make money later, off some kind of capital gain. But good cash flow makes a deal even sweeter.

Say you have project A that will give you a decent capital gain 5 years from now. The deal will set you back $100 a month. I.e. project A has $100 negative cash flow. How many of these projects can you maintain at the same time? 1, 2, 10?

On the other hand take project B, it will produce no capital gains at all in 5 years, however it does generate $100 a month in cash flow. Now I'm going to ask. How many of these projects can you maintain? Of course the answer is as many as you can get your hands on.

The point I'm trying to make is that even though some endeavours have a big payoff later. As long as they carry a negative cash flow there will be a limit on how many you can have going at the same time.

A deal that generates a positive cash flow does not limit the number of deals you can simultaneously make. In fact it opens doors to bigger and better deals. With the excess cash flow providing more flexibility for the next deal you make.

Now I'm not saying positive cash flow is easy to come by. In fact the truth is, the benefits of positive cash flow are not a secret, and in fact it is highly sought after. You have to put on your creative deal making hat.