Cash on paper, Cash in the hand & REI

Hi folks,

I realize the point of REI is to have a positive cash flow, and net worth. That said, how do we get from "on paper " net worth to “in the bank” net worth?

It’s great that my tenants are paying off the mortgages - for the small price of property management headaches; but, owning a property with a paid mortgage is going to do what??? … giving me a heloc when i need cash?

how do i get cash in hand net worth?

Instead of strictly investing for cash flow and appreciation (buy and hold), consider doing some buy and sell deals to generate cash. Adding buy and sell deals to the mix will strengthen your financial situation and allow you to do more and bigger on the buy and hold side of the picture.

Or, you can get that heloc. But I like to pay things off if possible, rather than encumber them further. Actually, if you are looking at return on equity, there is a sweet spot range of loan to value for your properties which maximizes your return. That is assuming that you use the borrowed money for other real estate investments. There is an interesting and well thought out discussion of this in The Millionaire Real Estate Investor by Gary Keller.


You don’t ever get from “on-paper” net worth to “in the bank” net worth if you’re smart. Having a lot of money sitting in a bank account is a very poor use of that money, because of the low return. Therefore, most of your net worth should always be in more profitable investments like real estate or stocks. As your net worth grows, so should your cash flow - and cash flow is the key to having money to spend!


I like to keep cash in the bank and I consider myself to be smart. Seasoned money in the bank comes in real handy when I find a piece of real estate that I would like to buy.

Lots of diversified theories here. Kind of interesting. My father was property rich and cash poor and he always used to say: I have money in bricks but I can’t take my bricks to the store to buy groceries.

Eventually,at retirement, he sold his bricks and he can buy groceries and a heck of a lot more anywhere he pleases.

My strategy was buy and hold until a flip fell in my lap. The quick cash (2.5 mos) was nice so I did two more.

There are so many ways to invest in real estate.

Just like Steve like to keep his cash in the bank to buy properties. I have a cache of private lenders on standby when I want to buy a property quickly. Then we all make a some money and they let me do it again.

It’s about finding what’s right for you.

Thanks, guys. Mike, I didn’t mean that literally. I know the undervalue of having money in the bank. I meant in terms of liquidity, having a certain percent of cash nearly readily available, vs. having to find a buyer so I can have cash. (or buy groceries)

I intend that each purchase has a function; a group of houses will be cash flow, another group for paying down the principals, another for funding my stock purchases, another for taxes, and yet another - or some percentage of the pot - going toward acquisition. I think this confirms for me that I need some wholesaling in my portfolio.

In an unrelated note, another of my “predictions” came to fruition. I saw a house in the neighborhood in disarray; yard not being kept, petc. People were “hanging out” but not caring for the place. I thought to myself, “they’re in going to lose that house… they’re in foreclosure” Sure enough… it went to foreclosure, now there’s a sign out front.

I"m not going to lament that this property is another that I missed. Instead, I’m using it as confirmation that my instinct and analysis are right on, and when jump into this game, I"ll come out a winner.


I am a firm believer in keeping some cash in the bank - i.e. cash reserves. However, the original question was about having your net worth in the bank as opposed to “on paper”. My point was that while having some cash reserves is a necessity, keeping your entire net worth in cash would be extremely foolish as your return on investment would be very low. Therefore, you will never have your net worth in cash, but rather mostly in investments.



After rereading the original post I can see where you are coming from. I took the OP’s question as how to get a balance of cash, cash flow, and real estate equity in his life. That is what he meant, but it could easily have been interpreted differently.


Hmm… cash flow as an animate object. Interesting. Flowing for the sake of movement is one thing. Flowing and having 1. ready access or liquidity, 2. seasoned money for cash reserves - necessary for purchases and loan securities, 3. pocket cash. that’s another.

I want to have the latter so that when one of my children comes to me and says, mom, "I have a dream… how can I? … ) I can review his or her biz plan, then given him/her the seed money to be independent.

(and it’s “her” post) *grins. I seldom post my name because of privacy. - google etc.


Well, that would certainly explain the little pink female gender indicator in your profile, wouldn’t it…?




You know my philosophy is the buy enough property so that I can replace my income with rental cash flow. I believe that rental units are like the goose that lays golden eggs, if I sell them then I have a hunk of cash, but I don’t have that goose anymore and my lifestyle will run through $1million in 5 to 6 years. So I have to do it all over again or go back to work.

I keep my two businesses separate, I buy and hold for cash flow, and I buy fix up and sell. If I sell one of my hold properties, I will replace it as soon as I can. But buy and hold, or buy fix up and sell, all have to cash flow or it is not worth doing.