Cash Flow Blinders

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Hey friend,

Welcome to the 15th weekly edition of Pillow Talk! This is where I share my personal thoughts on property management topics.

This week, I’m talking about cash flow blinders.

Accidental landlords and less-sophisticated investors often don’t realize they’re wearing a set of these…

👉 Cash flow blinders.

This is a term we use to describe the effect cash flow can have on owners. If cash flow is good, they’re happy. If it’s bad, they’re unhappy. And they’re blind to everything else. Even if all other metrics are up and to the right, everything comes down to their monthly draw.

This is frustrating because, as a real estate professional, you understand that cash flow is not the only indicator of the health of an investment. Especially in SFR! You already know that appreciation and principal paydown are as good, if not better indicators from a wealth generation perspective.

So now the question is, do your clients know that?

I am a strong advocate for owner education, and this is a topic that is essential for owners to understand because it will make your life so much easier.

Once owners realize their wealth can grow via appreciation and equity, even if cash flow is poor or negative, the blinders will come flying off. And once the blinders are gone, they’re able to see the bigger investment picture. Once they can see the bigger picture, they’ll see there’s so much more to real estate investing than monthly income, and they’ll quickly realize how much they need your help.

Don’t take my word for it

Pete Neubig told me a story on his podcast about an owner who was planning on leaving, but ended up staying because Pete showed him the bigger picture. Here’s the story:

Pete’s accidental landlord client was consistently losing a few hundred bucks a month, and was not happy about it. The client came into Pete’s office to presumably share a piece of his mind.

Instead of capitulating or letting it escalate, Pete showed the client how he was still coming out on top in spite of negative cash flow. He surfaced the data to show the client that his rental had appreciated 300k in three years and he’d only paid 36k in management fees. “Is that a good deal?” He asked. The client was blown away, and not only stuck around, but was happy!

It’s a perfect example of what happens when the cash flow blinders come off.

Good night 😴

Lior Abramovich
Co-founder, CEO