As a fan of Robert Kiyosaki, it's difficult for me to say that cash flow is a bad investment metric. I agree wholeheartedly with Robert, cash flow IS indeed the king. But in today's real investment landscape, cash flow by itself can be misleading as an investment metric.

Real estate agents trying to sell a deal will often say, "This one cash flows!" It's probably the best thing to say to a would-be investor, and for good reason. After all, who invests to lose money?

But after seeing and looking at so many deals over the years, it never ceases to amaze me how little current cash flow says about an investment. OK, so it currently pulls a profit. That cash can be illusory. Here are several scenarios where a property can cash flow:

  1. Bad or Declining Neighborhood. Property value is depressed, so the purchase price is favorable to the cap rate, yielding a large positive theoretical cash flow on day one. Peak under above-average maintenance bills and you will see the cash gets eaten up quickly from expenses.
  2. Structural Issues. There are major capital expenditures on the horizon. Those large capital expenditures - roof replacement, sewer line overhaul instantly eat any cash generated for years.
  3. High cap rate = low growth math. The market seems to know that areas with a low growth rate, and it will be evidenced by depressed property prices, which show up conveniently with a strong cap rate.

These 3 reason illustrate a wide range of scenarios. They all cash flow, and yet, they are so different. More to the point, while they all cash flow, that cash flow may prove to be illusory or backfire over the long haul.

What is an investor to do? Obviously, we don't buy deals to lose money! As an investor, as long as you do your due diligence, reasons #1 and #2 will become obvious. The last reason, #3 is the trickiest and most alluring. If an investor makes cash flow a primary investment strategy, they may be drawn to properties that potentially have low growth. It's important in this case that the investor not use cash flow as their primary financial metric.

The way I see it, cash flow (and also cap rate, if I may add) should be a secondary metric, never a primary ruler for making real estate investment decisions. In my humble opinion, for the modern landlord and real estate investor, cash flow should be a strategy rather than a decision support metric.

In my experience, when an investor treats cash flow as a strategy rather than a fixed number, they gain more than just a spreadsheet—they gain a vision for long-term wealth. Real success is never found by staring at a static figure. The real question isn’t whether a deal works today, but whether you can force it to work within 3, 6, or 12 months. It requires a JFK-style shift in perspective: Ask not what the property can do for you, but what you can do to the property to generate a profit. This mindset elevates an investor from an accountant to a visionary, galvanizing their core strength: creating value to capture disproportionately large gains.

Let's apply this principle to the three scenarios above. An investor with a cash flow strategy mindset would never fall for the positive cash flow bad neighborhood trap. Let's say this bad / low appreciating neighborhood property has $1000 per month positive cash flow. But what's the strategy for increased cash flow? Can you raise rents in a crime-ridden neighborhood? The whole argument breaks down.

While a cash flow strategist will immediately turn down scenario #1, they will consider scenario #2. I'll be honest here, most new real estate investors run from scenario #2. An experienced investor will ask questions before nixing the deal. I once purchased a property with a few inches of water on the roof. The previous investor already installed a brand new a new roof 7 years ago. Every roofer told me that I needed a new roof. A new roof immediately would be a deal breaker. It would set me back years in terms of getting positive cash flow. But the problem isn't the roof. The roof itself is only 7 years old. The problem is the draining! To make a long story short, I installed the drain for $1,500. The roof ended up being good for many years after that. The drain only set me back 6 months. I got my short-term cash flow in an area with high long-term property appreciation. All because I had a strategy for getting cash flow.

Finally, let's look at scenario #3. Getting to the bottom of a deal in this scenario requires the investor to figure out whether the property is a "good deal" or if it is in a languishing rental market. To answer this question, the investor would need to understand the rental market surrounding the investment. And you know what? That's exactly what an investor asking the question of how can I double current cash flow in the next 12 months would end up figuring out. Someone trying to double cash flow would inevitably examine historical rent trends in the surrounding city. Instead of cash flow, the investor is looking at historical trends of: average rent per square foot, average days on market. He may drive around the area and note if the properties are well maintained, roofs cleaned, lawns cut. He looks to see if new businesses have been opening up nearby. Doing so flushes out the property sitting in a shrinking neighborhood.

In conclusion, I'd have to say that cash flow is king. But it should be treated as a strategy rather than an investment metric. And, in most cases, using cash flow as an investment metric leads a would-be investor astray.

Build durable rental wealth.
— Matthew Ma, Author of The Super Landlord

Disclaimer: I am the author of The Super Landlord, not a financial advisor, tax professional, or attorney. This content is for educational and entertainment purposes only. Real estate investing involves significant risk, including the loss of principal. Tax and real estate laws vary by location and change frequently; always consult with a licensed professional in your jurisdiction before making financial or legal decisions.