“What is your personal goal for ROI in real estate? Do you measure that in annual cash on cash return OR does that include the appreciation/equity gained for the year as well as the income generated by those investments? Thanks!” – Dr. Brooks, CO
My personal rate of return goal is 14%, annualized. That includes growth/appreciation plus cash flow (income). As I often teach: Cash flow is king. Predictable, recurring cash flow is the lifeblood of Freedom. Here at Freedom Founders, we focus on helping our members create enough cash flow to be able to confidently step away from earning active income without a second thought. But cash flow is only one of the many benefits of investing in real, tangible assets such as real estate. Another significant advantage is the opportunity to hedge against inflation and grow your net worth through owning real estate assets that appreciate in value. Conventional financial planners use an accumulation/depletion model: accumulate as much as you can throughout your career, then, once you step away from active income, you slowly deplete your nest egg and “hope” that it outlasts your life span. But who knows how long you will live or how much you will need in the future? That model lacks certainty and peace of mind. Instead, investors should invest to create a combination of cash flow (enough to cover your lifestyle needs) while also growing your nest egg (through equity growth/appreciation). This is the key to sustaining your Freedom.