Legacy Wealth Holdings

Cash, Cash Flow, or Equity: Which One Gives the Most Financial Stability?

“Cash is king.”

“Cash FLOW is king.”

“No, bro. Equity. Equity in deals is king.”

Dude, what is it?

What wins? Is it cash, is it cash flow, or is it equity in deals? Let’s talk through it.

#1: CASH

Cash gives you an opportunity to seize deals right away. As soon as you see something, you’re able to jump on it. You can capitalize on it. That’s a great asset to have!

However, sometimes you don’t need your own cash. It could be somebody else’s cash. So if you have access to other people’s cash, is your own cash king?

Maybe not. Maybe it’s second fiddle to someone else’s cash. You don’t necessarily need your own capital and access to your own capital in order to seize those deals if you know where to get capital pretty quickly from someone else.

#2: CASH FLOW

When it comes to cash flow, it’s nice to have that predictable revenue stream coming in and hitting your bank account every single month. Knowing that consistent cash flow is always there gives you a good, safe baseline to be able to pursue other opportunities.

Now, I think about cash flow like winning the lottery. Would you rather have a lump sum today or would you rather have cash flow over time? I personally know how to multiply money, so I’d rather have a lump sum right now instead of the payout over time because I can take that and I can multiply it far more than what the ROI would be if they just paid me predictably every single month.

#3: EQUITY

And then there’s equity in deals. If you aren’t aware, equity in deals means the portion of a property you own (and the amount you add to your net worth from that deal), but it isn’t liquid cash. When a property is sold, you’ll receive any equity you put in. A lot of people, including myself, talk about net worth and the importance of building a balance sheet and a personal financial statement.

But you can’t pay bills with equity.

Go try to pay your mortgage with equity, Go try to pay for coffee with equity. They’re going to laugh at you.

Equity might not be the total answer, but it is a big part of the equation.

And I think that’s what we need to understand.

It’s not one or the other that is better. All three of those are very important to have if you want financial stability.

For example, I keep a certain percentage, usually between 5 to 10%, of my personal net worth in cash. 

But in making sure that I have a good cash position, I want to have people in my network with people who have cash. Even if I am equity heavy and cash poor, if I’m moving some money around or jumping into a deal, I make sure that I’m never totally cash poor because there’s always people in my network that I can go to who I can raise capital from in order to jump on those opportunities that arise.

Then I have a cash flow business, not just rental real estate.

I actually don’t live off of any of my income for my rental real estate. That all gets redeployed into more deals or into improving the existing buildings and into my operational side of things.

My coaching and consulting business is more of a cash flow business, and that’s the income I live on. It allows me to invest everything else, all the residual income and cash flow that comes from my rental real estate, back into doing more deals and building more wealth.

And then equity is important because equity helps you gain access to more capital on the traditional finance side.

In order for me to get bank financing, they want to know that I have a big balance sheet. They want to know how much property I own, how much equity I have, and what my net worth is. The more your net worth is, the more people are going to want to lend you money because you’re more bankable in that capacity.

So it’s not an either-or.

It’s not a “which one is better?” All three of them are very, very important. All three are pillars to your financial empire.

You have to have cash or access to cash. You have to have some sort of cash flow that creates stability in your environment. And then you have to have equity in deals because that’s what’s going to build long term wealth for you and your family.

We made a video on this! Watch it on the Legacy Wealth YouTube channel here: https://www.youtube.com/watch?v=WiYqB9olHOQ