Part 2 – Converting Net Worth into Cash Flow

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A few years ago, I wrote a blog post titled — Converting Net Worth into Cash Flow. I think that article was somewhat controversial then, and perhaps it still is to a large degree today… The reason being? Well, when it comes right down to it, when we are talking about the subject of early FI, without question, the popular consensus and narrative out there across the blogosphere (and other media outlets) is that at the end of the day, cash flow reigns supreme…

Now, I’m not gonna go ahead and dispute that, per se, but as usual, I think the devil is in the details… and we need to deep dive into things to see how all the pieces are connected.

For myself, I had one of my many lightbulb moments around 2014 (I forget the exact date), when I was attending a local real estate meet up (which I loved to do back in the day) and chatted with a few high net worth individuals… Through our discussions, I got to pick their brains and learn many things… One profound connection that I put together (eventually) was that although the personalities from each person varied to a large degree, a common denominator with these folks was this:


They all owned very HIGH QUALITY assets that were also coveted by other high net worth individuals.


Now, the above “revelation” that I made might not seem like a big deal at all to you, but I assure you, that distinction that I ultimately put together is what helped me not only to achieve early FI, but more importantly, sustain it.

Around mid 2014/early 2015, I was still heavily active in the real estate scene and buying up rental properties, as many readers will be able to recall… Both consciously (and somewhat subconsciously) I had already heard the above message loud and clear, as I elected to deviate from my new strategy of focusing on building up a portfolio comprised of low appreciation but “better” cash flowing Midwest properties to again prioritize buying up high appreciation but “lower” cash flowing Bay Area properties (my original plan)…

You know, looking back, I don’t think this blog was ever more popular than it was around 2013-2014, when I was a large proponent of Turnkey Investing and focusing on: cash flow, cash flow, cash flow…

However, as I’ve learned over the years, just because a strategy is popular and accepted by the masses, it doesn’t mean that it’s the right one to employ… In fact, if I had to lay it all out there for you at this very moment, I would go on to say this:


Turnkey Turkey Investing was the single greatest mistake that I ever made in my investing career! I sacrificed many wonderful buying opportunities by being entirely too myopic, chasing after mediocre (to outright disastrous) cash flow deals.


Again, it all points back to the statement made above, the common denominator and glue that connected these very astute (not to mention filthy rich) investors…


They all owned very HIGH QUALITY assets that were coveted by other high net worth individuals.


Trust me on this — Turnkey Turkey Investing is NOT that!


Back in my younger days, I was too naive and short-sighted to ask some very basic (but important) questions…


“If some of the wealthiest people that I know in real estate aren’t chasing after the same out of state turnkey turkey deals that I’m fawning over, why is that?”


“Why is it that these people who can easily afford to go out of state and buy 10-20 properties ALL CASH, have ZERO interest in doing so… yet keep on electing to buy up more expensive Bay Area properties that offer what appears to be pathetic monthly cash flow?”


“Why are these people violating and completely ignoring the 1% Rule (in retrospect, I’ve learned that this is quite possibly the dumbest rule out there in real estate)?”


Because at the end of the day, it’s all about: Quality, quality, quality…


High net worth individuals don’t waste their time targeting after junk assets… So why should you? Why should I?


It’s newbies and uneducated retail investors who elect to chase after cash flow with reckless abandon, without any consideration for anything else… which I’m learning first-hand can actually be a very dangerous landmine that can completely derail (rekt) your early FI dreams… particularly as it pertains to Real Estate Investing. Worth noting is this very important distinction between stocks and real estate — Stocks can’t go below zero… Real estate can… and junk assets often do (e.g. expensive repairs, city violations, attorney fees, etc.)! With HIGH Quality real estate, you ALWAYS have an exit strategy… With shit properties, you could easily end up trapped in Hotel California… Sometimes the only way out, is to sell at a substantial loss!!!


In my own case, fast forward to the here and now (today), and it’s never been more obvious to me what a wonderful decision it was for me to load up on Bay Area properties… and what a shot in the foot I gave to myself in attempting to go out of state and extract as much cash flow as possible via overpriced and pathetically low quality turnkey turkey investments…


By focusing entirely too much on cash flow, at the end of the day, I ended up earning even less cash flow from my terrible out of state turnkey turkey investments…


Ironically enough, it’s my Bay Area properties that are my real cash cows… and the gifts that keep on giving.


So, naturally with those type of real-life experiences… my thinking has been altered significantly over the years…


On this blog, since about 2015, there has been a major focus on alternative investments (for a reason)… No, it’s not because I want to be contrarian just for the sake of being contrarian… but it’s because I’ve learned:


You have to go where the opportunity is.


It’s not about going against the crowds and trying to outsmart the markets… It’s about being a fan of opportunity… and an agnostic investor… I don’t swear allegiance to any single asset class… If something is grossly overpriced, I’m not going to be talking about it, or actively pursuing it… On the other hand, if we have a scenario like in late 2015/early 2016 when mining stocks were obliterated and completely hated by everyone, well, it’s something that’s always going to appeal to a guy like me…

If I’m gonna be burned by investing, I’d prefer that it happen when I’m attempting to buy HIGH QUALITY assets at freekin low firesale prices… I realize a lot of the things I ramble on about incessantly make little to zero sense to the masses, but I would like to believe that there is a method to the madness… Earlier this year, the culmination of a lot of hard work, research, and persistence paid off when my mining stocks portfolio eclipsed $1 million in gains (unrealized + realized)…

Now I have enough cash on hand to be able to pay off all my debts and remaining mortgages on my rental properties… which was kind of the goal all along with that “crazy” speculation…

Yes, it was an alternate route I took (some would argue to the insane asylum), but this all ties together back to cash flow… which is ultimately the “name of the game”… Yes, I still agree with all that, but like I said from the beginning of this article, the devil is in the details…

And importantly, with very speculative things, there are never any guarantees, and I must have looked like a total idiot to everyone on here when I was documenting my mining stocks journey in real-time… and having to painfully disclose the ugly details when everything kept on continuing to crash and burn… more and more… everyday… into record low territory

With that experience in my back pocket, I will continue to emphasize this:


When in doubt, stick to accumulating the HIGHEST QUALITY assets… You want to own what other affluent people covet…


  • With real estate, I want to own rental properties in the BEST locations where all the $200k/year high salary folks want to live and raise their families.
  • With mining stocks, I want to own the BEST mineral deposits out there that are prime takeover candidates for a major producer.
  • With cryptos, I want to own the BEST projects out there that have the strongest teams backing them with very good odds of building a robust and sustainable “network effect” on their platform.
  • Etc.


As for turnkey turkey rental properties, by and large, these operators/salesman can only make real $$$ flipping overpriced dogshit properties to out of state newb investors (there’s a good reason the local investors don’t touch these products)… It’s tough to generalize, but I wouldn’t waste my time at all dabbling in this space (knowing what I know now) since the odds of long-term success are minuscule, at best… Certainly, affluent investors don’t covet these properties at all…


The caveat is — You want to be able to buy HIGH QUALITY assets at a low price. Get the most bang for your buck. That’s really the only way I know of to shortcut the early FI journey…



It’s not easy, but if you can succeed, then it makes perfect sense (after the fact), to eventually book your profits so that you can finally swap back and into everyone’s favorite Buy and Hold Forever type of assets… The investments that you deep-down wanted to own from the very beginning.


I’m not a hater of dividend stocks, index funds, even expensive Class A real estate… As I already pointed out, my Bay Area properties were the best investment decisions that I ever made in my life… But at today’s current prices (2-3x more than what I originally paid), I just don’t think it does any good for me to ramble on and on about what a buying opportunity they are TODAY for anyone reading this… because at record high valuations, they CLEARLY are not cheap!


But if you can make explosive gains elsewhere, and want to redeploy proceeds back into “overpriced” dividend stocks, index funds, Class A real estate, more power to you… I think that’s an awesome strategy… Actually, that’s something that I will probably elect to do myself, because at the end of the day, again, it’s all about cash flow, particularly via the HIGHEST QUALITY assets out there…


Look, building up a dividend portfolio that is worth $1-2 million, brick by brick, is no small task for most people out there… but if you can take a shortcut there, then why the hell not? I love dividend stocks (believe it or not)… They are truly 100% passive. For a life in early FI, you can’t beat that!


But in today’s challenging investing environment where most assets are in bubble territory, I just think it makes more sense for the early FI enthusiasts out there to focus more on building up net worth first and foremost… because you can always convert that to cash flow later.


But the other way around? It doesn’t work so well…


As i learned the hard way with my turnkey turkey rental properties…


What a most painful lesson, indeed…

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2 years ago

Stop churning out quality content faster than I can read :D. Great post

2 years ago

FI, I have to disagree with you a little on the whole cash flow thing. While I agree the outsized gains come from property appreciation, value add forced appreciation etc. Cash flow pays the bills, its that cash flow that gets you thru the tough times For one you bought your real estate in one of the most volatile real estate markets in the country. I can think of 3 if not 4 major corrections in California real estate. And you bought near the bottom and are by all accounts we are getting closer to the top, if not a… Read more »

2 years ago

I totally agree that Turkey rentals are not the answer but is a good starting point for new investors to get off the jacked up wall street train. But I disagree with going for the “best assets” because unsophisticated money chases these deals and inflates their purchase price. If you have an experience you can invest in undervalued value add Class C and B assets as long as you have a capped time horizon. This is why I like to look for 1975-1990 properties because our business plan is the squeeze out the last of the value of these properties… Read more »


[…] as only people who want them are cheap investors. “looking for a deal man!” My buddy FI Fighter also calls these Turkey rentals too but I disagree with his sentiment about going for the […]