The Hassle-Free Cashflow Investment Spectrum

by Hassle-free Cashflow Investing Specialist – Rob Kippel

At its core, Hassle Free cashflow Investing has two fundamental investment strategies: buy-and-hold real estate and real estate secured notes. These two strategies are implemented in a way to reduce both hassle and risk, and then leveraged up as much as possible using long term fixed rate debt to increase returns through arbitrage and the destruction of debt through inflation. Each investor implementing this plan will have a different proportion of one strategy to the other depending on his personal investment goals, risk tolerances, resources, and macroeconomic expectations. On one end of the spectrum would be the investor who only owns a Hassle Free buy-and-hold real estate portfolio but no real estate secured notes. On the other end is the investor whose portfolio is comprised of multiple Hassle Free real estate secured notes but no ownership of rental property. Most people fall somewhere in between, implementing each strategy to some degree depending on their personal situation. To assist you in deciding how you would like to implement the Hassle Free cashflow investment strategy into your portfolio, if at all, I would like to compare and contrast buy-and-hold real estate vs. real estate secured notes and then examine some case studies of how people implemented the Hassle Free Cashflow strategies for their personal circumstances.

Buy-and-hold real estate is a tried and true strategy to building wealth. Individuals have varying degrees of success with the strategy depending on how they go about building their portfolio, but the underlying strategy is sound. Profit sources from this strategy include cashflow, appreciation, amortization, and tax benefits. At Hassle Free cashflow Investing, we implement the buy-and hold strategy as outlined in David Campbell’s free e-book Hassle Free cashflow Investing which can be downloaded under the Investor Education tab at hasslefreecashflowinvesting.com. If you haven’t read this book yet, I highly recommend you do so as it can short cut your road to sustainable wealth by helping you start with a fundamentally sound strategy and helping you avoid the mistakes that will slow your progress. Buy-and hold real estate is the “slow and steady” approach. You will not be able to retire the day after you buy your first rental property. Due to the multi-dimensional nature of real estate, it may feel at times that you are spinning your wheels, but over many years, if done correctly, you will find that your are substantially more wealthy than when you started. Just as buy-and-hold is not “get rich quick,” it is also not totally passive either. When implemented according to the Hassle Free cashflow Investing principles, this strategy is quite often, as the name implies, hassle free. But, to be clear, hassle free does not mean effort free! You should be occasionally tending to your investment (or assuring that someone else is while you are not) to make sure it is performing optimally for you. Our buy-and hold strategy, due to its highly leveraged nature, has minimal positive cashflow (but no negative cashflow) and tends to have annualized returns on investment that are significantly higher than other hassle free investments. From a liquidity standpoint, real estate is not an investment you can liquidate at the click of a mouse or the dialing of a phone. Although it is possible to liquidate a property in less than thirty days, this usually requires a well established network of professionals and a drastic reduction in price. One side note that I wish to inject here is that should you ever require some liquidity from your rental property, you may want to consider selling that property using our Hassle Free seller financing strategy. This will usually make your property more marketable and command a higher selling price. In addition, you may wish to be creative and create two or more notes so that you can sell one note to raise needed capital while hanging onto the cashflow and continuing to profit from arbitrage on the rest. With regards to performance in inflationary or deflationary environments, our buy-and-hold strategy will tend to do extremely well during periods of monetary debasement and may underperform during periods of extreme monetary (and more specifically credit) contraction. To further explore this topic please refer to my earlier blog post Hedging Against Deflation in Inflationary Times.

The ownership of real estate secured notes, although less sexy, is a complimentary tool to the buy-and hold strategy in building sustainable wealth. Just as with the buy-and-hold strategy, when implemented the wrong way, it can be very risky and highly ineffective. We, therefore, follow the principles outlined in David’s second free e-book Hassle Free cashflow Lending to reduce risk and increase returns. Real estate secured promissory notes can be acquired in three main ways 1) purchased from an existing note holder 2) created through lending existing capital 3) created on the sale of property you own. To the uncreative, acquiring notes is a typical case of “it takes money to make money.” At Hassle Free cashflow Investing we have assisted many investors implement this strategy in their portfolio through leverage and arbitrage with very little money to start which substantially increases return on investment. The primary profit source of owning notes is cashflow. In the event the borrower defaults and thereby relinquishes the collateral to you there is the potential for significant capital gains and/or increased cashflow. The cashflow received from notes is typically higher than those from the buy-and hold strategy although you are giving up appreciation and tax benefits. Owning notes also tends to be much more hassle-free. Once the initial effort is put in up front, there is not much left to do but collect checks (and if you are really diligent, check on the condition of your collateral). If one of those checks fails to arrive, you will put in just a little more effort to receive handsome capital gains and/or more cashflow once you sell or own the collateral. Total return on investment on Hassle Free cashflow notes will typically be lower when compared to a Hassle Free buy-and-hold property but provide for better cashflow and higher cash-on-cash returns. The steady income stream provided by notes is subject to devaluation in highly inflationary times but potentially more relatively valuable during wide-spread deflation. In addition, seasoned performing notes tend to be more liquid than real estate although they will rarely sell at face value. To get top dollar for your note I would recommend selling to a non-sophisticated investor who would be quite happy with the secure steady stream of payments from your note and will probably over pay for it.

Case study #1
Malcolm and Elyssa are a young couple with two children, Maynard and Cynthia, and have decided to work towards financial freedom by building sustainable wealth through implementing the Hassle Free cashflow Investing strategy. Both have good jobs that they enjoy and plan to keep for the next 5-10 years while they implement their plan. Malcolm pays attention to the severe economic problems facing the US going forward and is absolutely convinced that the Federal Reserve will continue to destroy the value of the dollars they have earned and saved. He also realizes that his children will be paying for unprecedented and unsustainable federal deficits and political folly for the rest of their lives through taxes, inflation, and a lower standard of living. To him, this is unacceptable. Malcolm and his wife decide that although higher cashflow now from their investments would be nice, they really don’t need it and would rather invest for the highest returns and inflation protection. They find out that using the low money down strategies of Hassle Free cashflow Investing, they can purchase two properties per year! Since they have their jobs to support them, they don’t mind the smaller cash-flow and realize they will have substantially more for retirement and to pass on to their kids than if they were to invest in notes. Plus, if they ever wanted to boost their cashflow they know that the team at Hassle Free cashflow Investing can help them create a secured note by selling one of their properties using the Hassle Free seller financing concept. Elyssa doesn’t mind spending the few hours a month to call property managers, review and file documents, and pay bills because it makes her feel secure knowing she is in control as well as giving her a sense of pride from maintaining her nest egg. Malcolm was smart and keeps adequate reserves to allow him to hang on to his properties should problems arise. They both find comfort in the security they feel about their own future as well as their kids’ even in the face of uncertain and treacherous economic times.

Case study # 2
Anthony and June, are in early retirement and are a little anxious that they won’t have enough monthly income to have the type of retirement they had hoped for. Their home is paid for so their monthly expenses are low but they see the price of food and energy going up every year right along with their taxes while their social security checks stay the same and their 401k loses value. Their son Malcolm tries to convince them that this is only the start of inflation and that things are going to get much worse but they remember the stories their parents told them about life during the crushing deflation of the 1930’s and are worried it could happen again. They want to lock up a steady source of income but with interest rates and dividend yields so low they just don’t have enough money to be able to produce the income they need to enjoy retirement. They see how well their son Malcolm and his wife Elyssa are doing with their real estate investing and know it works but they just don’t have the time to wait for that type of portfolio to bear its fruit. Even if they did have the time, they don’t want to be too involved with their investments because they want to spend time together during their retirement to make up for the 30 years of 55+ hour work weeks. Besides, since Malcolm and his wife are actively implementing their investment plan, Anthony and June are not as concerned about having something to pass on to their son. Malcolm suggests to them building a portfolio of cashflowing real estate notes. With the help of the team at Hassle Free cashflow Investing, Anthony and June transfer their 401K’s into self directed retirement accounts. They use this money to make some Hassle Free Private Money Loans which immediately gives them a steady, reliable source of monthly income and a handsome cash-on-cash return. Although June was very hesitant, Malcolm finally convinced her that it was a good idea to take out a new mortgage on their home and invest the proceeds. She was almost crying on the way to the closing thinking of how hard they worked to pay their mortgage off and now they were just going to start all over again. When she received the check for $300,000 that had to be paid back over the next 30 years at 5% interest and she realized that they were now going to invest this money for monthly cashflow at 12% she was ecstatic! “Oh Anthony! We’re finally going to have enough monthly income to retire together!” She was in tears.

Case Study #3
Joe was a single guy who always knew real estate was the path to sustainable wealth and had read extensively on the subject. He didn’t really have a clearly defined strategy, he just knew he had to get started and then go from there. He had held a steady job for quite some time now and always paid his bills on time. As a result Joe had great credit. He knew he could get approved for a mortgage if he could only come up with a big enough down payment. His parents, Anthony and June, just came into a large sum of money after taking out a new mortgage on their free and clear home but they already had plans for investing it all to provide monthly income for their retirement. Joe knew his older brother Malcolm was having steady success with real estate over the years and decided to go to him for advice. Overhearing the conversation, Malcolm’s wife, Elyssa suggested to Joe “Why don’t you call the team at Hassle Free cashflow Investing to see if you can partner with your parents and use your credit to leverage some of your parent’s cash so that you can both profit?” Joe called the next day and spent the next two weeks excitedly exchanging emails and phone calls with various members of the team. Two months later Joe had closed on his first investment property and his parents didn’t even notice the higher return on investment they were getting because they were enjoying their retirement and lower cost of living overseas while Joe and his brother Malcolm managed their parent’s Hassle Free cashflow Investments portfolio. Joe slowly and steadily acquired more buy-and-hold properties like his brother Malcolm but every so often sold a property using the Hassle Free seller financing technique when he needed a cashflow boost in his portfolio. Today Joe owns a balanced portfolio
of buy-and-hold rental property and cashflowing notes, has enough cashflow to leave his job and work as a full time real estate investor, is protected against both inflation and deflation, and is financially free and independent. He has even elevated his financial status enough to be eligible to take advantage of some of the exclusive private placement opportunities only available to high-income and high net-worth clients of Hassle Free cashflow Investing.

There are countless scenarios like these, each one with slightly different details. I would very much enjoy learning the details of your story to assist you, if appropriate, in implementing the Hassle Free cashflow Investing strategy according to your needs. My time is free to you and there are no obligations. In addition, if you meet the requirements I can even set up a free one on one personal investment strategy consultation with professional investor and developer David Campbell! Please email me at Rob@hasslefreecashflowinvesting.com or call (866) 931-9149 Ext. 1. I look forward to our conversation. Until next time, stay sharp!