You Don't Always Buy Properties For Cash Flow

Understanding this with the Financial Independence Asset Allocation and Cash Flow Engine™ spreadsheet

In the Financial Independence Asset Allocation and Cash Flow Engine™ spreadsheet you can visually see where your assets are allocated and how cash flow is being generated from those assets.

Then, you can decide where you want your cash flow to go.

Properties

For example, let’s zoom in and just look at properties for today.

Group 1: Owner-Occupant Properties

The large red 1 is for your owner-occupant properties. We’ll call that group 1.

We don’t typically rent out owner-occupant properties (unless you’re house hacking) and so we don’t typically show cash flow and Cash Flow from Depreciation™ being generated by those properties.

If you were house hacking, you could list the property under either group 2 or 3 depending on whether you plan to keep it for cash flow as part of financial independence goal (group 2) or sell it for chunks of cash later.

We also don’t show that you could sell your property for a chunk of cash later. Again, if you planned to do that with your owner-occupant property, put it in group 3. Those are the ones you plan to sell for capital gains.

Group 2: Keep for Cash Flow

Some properties you plan to utilize for cash flow and keep forever. These are the properties near the large red 2. We’ll call these group 2.

Properties here may produce some “Cash Now” in the form of:

1. Cash flow and

2. Cash Flow from Depreciation™

This is money that can be spent now from these properties.

This “Total Cash Now” is labeled with a green C in the image above.

But, even though these properties are earmarked—by you—as part of your financial independence plan to generate cash flow for you they also are likely going up in value from appreciation and building equity through paying down on the mortgage.

Between:

1. Appreciation and

2. Debt Paydown

You are generating “Cash Later” as well.

Since you’ve identified these properties as ones you plan to keep for cash flow, we only show two options for you to be able to access the “Cash Later” in these properties:

• Cash Out Refi and/or

• Home Equity Line of Credit (HELOC)

In both those cases you could access some of the equity in those properties by borrowing your accessible equity in the property.

If you pull money out via a Cash Out Refi, we labeled that with a green D in the image.

If you pull money out via a HELOC, we labeled that with a green E in the image.

To summarize for group 2, you can access Cash Now via cash flow and Cash Flow from Depreciation™ and Cash Later from Appreciation and Debt Paydown via borrowing your accessible equity with either a cash out refi or a HELOC.

Group 3: Sell For Capital Gains