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Buy a ticket...

8/25/2014

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The joke goes like this:

There is this guy who's always been poor, and one day he decides to pray to God that he could win the lottery. 

He prays and prays, but doesn't win. Every day, he prays to God that he could win the lottery, and it never happens.

One day, when he's very old and frustrated, he gets on his knees and says, "Look, God. This is the last time I'm going to pray. PLEASE let me win the lottery, or at least tell me why you aren't letting me win."

Suddenly, an angel appears before the man and says, "Look, sir, could you do God a favor and at least BUY A LOTTERY TICKET???!!!"

The moral of the story?  You can read all of the books, get all of the best training, but if you don't ACT, you'll never ACHIEVE.  You have to eventually BUY THE TICKET.

In a similar vein, I'll share something I learned many years ago in a seminar I attended.  The presenter, who had her PhD in something or other, said this:  

"My parents always encouraged me to achieve my educational goals.  They said, 'What you know is what counts.'  Later in life, I learned that my parents lied to me.  It's not what you KNOW that counts; it's what you DO with what you know that counts.  

So what are you doing with what you know?  What is keeping you from "buying the ticket" to achieve your investing goals?  

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ROI vs. COC?

7/9/2014

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When comparing and analyzing properties, we prefer to use the "Cash-on-Cash" (COC) return rather than the Return on Investment (ROI).  We do this for several very important reasons.  

To start, we calculate ROI by combining:
  • Cash Flow
  • Mortgage Principal Paydown
  • Property Appreciation
  • Tax Benefits
...  and dividing the total by the cash required to purchase the property.

The COC is simply the annual cash flow divided by the cash required to purchase the property.  

We believe that the COC gives a better "apples to apples" comparison for cashflow investors because:
  • Cash flow for any property can easily be calculated using standard income and expense assumptions.
  • For cash purchases, there will be no mortgage principal paydown since no mortgage exists. 
  • Appreciation for a property is an unknown and may only be realized when a property is refinanced or sold.  We choose not to inflate a property's ROI by adding in anticipated or forecasted appreciation.  
  • Tax benefits will vary greatly depending on an investor's individual circumstances.  

In short, if you are looking to invest for cash flow, COC is the figure to know!  
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