Cash Cow Alternatives

General Real Estate Investing
1

Hi,

As many of you know…SFH rentals…(their acquisition and long term hold)…eat up A LOT of cash.

I’m looking for any and all suggestions for REALISTIC cash cow alternatives to fuel SFH purchases.

Substantial cash cows…(businesses that can generate significant income on a monthly basis)…not small potato stuff where you’re spinning your wheels with little return on investment.

One thought I’ve had is a Dollar Store franchise…yet, haven’t looked into their startup costs.

Any ideas…please feel free to share.

Thank you!
-Mike

2

It’s interesting that you ask this question on this site, since it’s all about real estate investing, not how to find a cash-cow franchise. It’s like asking a bunch of neurosurgeons, “What’s the best way to treat acute appendicitis naturally?” “I dunno, use a vegetable peeler on it.”

What you mean to ask is what the least expensive way to create cash-flow. Would that be fair?

I can only speak from experience and observations. Franchises are rarely cash cows, and are not low-risk, nor are they cheap to buy, nor are they as predictable as real estate investments.

As an aside, there’s safety in numbers in anything. Just like a 10-unit building is a safer risk than one single family house as far as actual net cash flow, so is owning ten Subways, over just one. You’re sure to have one Subway that barely meets it’s bills, and another one that outsells the next three. If you bought one single franchise, and end up starting with the dud, then what?

A lot of investors come to the conclusion after a while that there must be easier ways to make money than real estate. And they look at franchises. I’ve yet to hear anyone whose done that, say that it’s easier than real estate investing.

If you’ve got a lot of money, you might consider passive real estate investing schemes such as triple net leases. With these you basically collect rent checks, and someone else manages the situation.

Otherwise, I’m not finding any ‘no work’ cash cows. There ‘are’ cash cows, but they require some commitment of either skills, time, or money, or a combination of all three.

After you know what you’re doing, it seems that the time and money involved can be minimized, without sacrificing the cash-flow. At least that’s my experience doing what I do.

And that’s why I’m sticking with real estate. I know it. I don’t have to reinvent the wheel. I can do it with minimal time and money invested, and still get better results than anyone else I know spending the same amount of time and money.

Good luck.

3
It's interesting that you ask this question on this site, since it's all about real estate investing, not how to find a cash-cow franchise.

I didn’t!:

I'm looking for any and all suggestions for REALISTIC cash cow [b]alternatives[/b] to[b] fuel SFH purchases[/b].

-Mike

4

LOL! I missed the ‘fuel sfh purchases’ part of your question.

My advice still holds.

Your first source of financing, should be sellers, not be banks. Your first source of down payments should also be the seller, and not what you’ve earned.

That said, go find everything that Robert Allen has written on “Nothing Down” (no down payment formulas).

Actually Bernard Zick taught him most of what he knows, but Zick is dead, and it’s like pulling teeth to get people to sell their Zick Materials.

Otherwise, one of my students uses the cash flow system I taught him to fund his commerical rehab business. It’s basically what you want to do, but he’s not buying SFH with his cash-flow.

He wasn’t a newbie, so he had confidence to wade into the half-million dollar price points, and flipped the financing on two houses, and within four months he had over $80,000 to work with on his commerical rehab business.

To give you some perspective, he was stalled investing-wise, and his credit was still wrecked from the bubble; losing five houses to foreclosure. However, he and his wife had good-paying jobs, and so coming up with some working capital wasn’t an issue. Something like $15,000.

On the first house he had to pay three back payments, which he paid from the down payment he received on the sale he financed. On the second house, the seller wanted five thousand ‘just because’. So, it cost my student about $9k plus advertising to 2,500 prospects once a month for what turned out to be two months, before he got distracted by his commercial rehab steal deal.

His one-time costs included:

  • professional house cleaning,
  • lawn mowing,
  • pool cleaning,
  • window washing,
  • carpet cleaning,
  • a mailing list,
  • my training
  • time writing and posting classifieds
  • time, gas, materials placing bandit signs
  • postage and mailing service
  • attorney review of his documents

All that, in return for $80k in four months.

I don’t know where, or how else, you can make a quick $80k to fuel your SFH investing, for little more than a $9k investment. Even then, half that investment was paid for out of a buyer’s down payments. So, it was more like $6k plus costs to put $80k in the bank.

To be fair, that was pre-tax profits. However, he didn’t have to pay taxes for at least a year later.

That’s one suggestion that’s actionable, and realistic.

FWIW

5

Awesome answer Javipa, I’m going to have to re-read that one.

6

Yeah business’s are basically cash cowsssss

7

You need to read the book “The E Myth” by Gerber. It talks about the difference between being self employed and owning a business. Most franchises (all of them) are you buying a job to be self employed. If you own a business, when you look at your organization chart there should be no box with your name on it. You work on your business not in your business. Real estate is a business.

The best way to not work in a real estate business is to look at multifamily. An apartment complex has a manager, handyman, and a porter (at least) That means if you don’t show up for a month or 2 everything happens. You are needed for decisions like when to do upgrades or capital expenditures, hire and fire, and strategic adjustments. Single family houses don’t really lend themselves to be self running as much. It can be done but you need to know the model.

Apartment complexes also self collateralize. That means the mortgage is not granted based on you it is based on the property (Net Operating Income) The down payment can also be had using syndication (investors).

8

Bluemoon, I was just reading the first few posts of your blog site, and that is some of the most straight-forward, and yet sophisticated stuff I’ve read concerning how to get into multifamily investing, I’ve read in a while.

I especially liked the advice about using professionals, and how they’re not all the same …the way you put it, that is.

Good stuff.