You're broke because you chase cashflow
Most real estate investors chase cash flow. Here's why that's keeping you broke. In this video, I'm breaking down the strategy that's helped me build wealth way faster than the traditional buy-and-hold approach — and why almost nobody in the residential world talks about it. I'll walk you through real deals I've done, including:
A 9-story building in Chattanooga we turned into a $2.2M profit (equal to 7 years of cash flow — in one deal)
A $435K retail building I flipped for nearly $200K in profit by doing one thing: signing a lease
A dirt lot we rezoned and flipped for a $1M gain, then 1031 exchanged into passive income
The truth is, you're not choosing between cash flow OR appreciation forever. You do value-add first to build your capital base — then you can afford to invest for cash flow later. If you're starting with little to nothing, this is the strategy that changes everything.
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Key Takeaways:
Cash flow vs. value-add strategy
Relying on small monthly cash flow from rentals takes too long to replace a W2 income.
Tyler advocates focusing first on value-add and forced appreciation (creating big equity pops) rather than slow cash flow.
Example: Chattanooga office building
Bought for $1.8M, spent about $600K on soft costs and some work.
Sold off-market for $4.6M in ~18 months, making roughly $2.2M.
That profit was equivalent to about 7 years (84 months) of cash flow in one deal.
Example: Small East Nashville retail deal
Bought for $435K; 2,200 sq ft single-tenant retail.
Before closing, they secured a lease, which raised the appraised value to about $650K.
Sold for ~$625K, making close to $200K over 3 years.
The main value-add was simply getting a tenant and a lease, not major renovations.
At ~$2K/month net cash flow, it would have taken about 100 months (~8+ years) to make the same $200K from cash flow.
Role of taxes and 1031 exchanges
Concerns about capital gains tax are addressed by using a 1031 exchange to defer taxes.
Even when paying capital gains, the time value of money means big lump-sum gains now can still beat years of cash flow.
Starting with little or no capital
Tyler began as a commercial real estate broker, rolling his commissions as equity into deals (minimal cash out of pocket).
Repeating value-add deals built up his capital base to where he could now sell everything and live off net-lease cash flow (e.g., Walgreens, Starbucks).
Transition: value-add first, then cash flow
The strategy is:
Use value-add deals to rapidly grow your capital base.
Later, shift that capital into stable, cash-flowing assets (e.g., low cap rate, credit-tenant deals).
Example: Buy dirt for $618K, rezone, sell for about $1.575M, then 1031 into income-producing property and fund a self-storage project projected to net $15K/month.
Why commercial over residential
In residential, value is mostly property + land; leases don’t dramatically move value.
In commercial, value is tied to income and leases (like buying a business at a multiple of EBITDA).
This makes it possible to “create” equity by:
Signing or improving leases
Repositioning or rezoning
These levers don’t really exist in the same way in typical residential investing.
Target audience and action step
Strategy is best for those starting with $0–$100K, not for people who already have ~$10M in cash (who can go straight into cash-flow investments).
Tyler promotes his CRE Accelerator mastermind where he teaches how to:
Find value-add commercial deals
Fund them
Close and execute the business plan.
About Your Host:
Tyler Cauble, Founder & President of The Cauble Group, is a commercial real estate broker and investor based in East Nashville. He’s the best selling author of Open for Business: The Insider’s Guide to Leasing Commercial Real Estate and has focused his career on serving commercial real estate investors.
Episode Transcript:
Tyler Cauble 0:00
Everybody gets into real estate for the cash flow. They think, if I buy a house, I'll get this much in cash flow every month, and after I stack this many houses, I'll be able to replace my w2 income. The problem with that is that it takes forever to do. You have to use your active income to make enough money to then buy a house because you're not cash flowing enough to really buy anything else. And look, I'm not saying that that logic is wrong. Cash flow is real. The checks come in and the equity builds up, but it's going to take forever for you to get anywhere with it. Meanwhile, there are investors in your exact same market building wealth way faster, using the complete opposite strategy, which is what I have done. Let me show you what I mean, using actual deals that we have done over the last seven years.
Tyler Cauble 0:57
We bought a building in Chattanooga for $1.8 million basically an expensive house. It was a nine story office building in downtown, and we were planning to convert it to micro apartments with a rooftop bar, some maker spaces on the ground floor. It's gonna be a pretty cool project. We spent about $600,000 over the 18 months that we owned it on things like demo design, our soft costs, carrying costs, a little bit of construction, we ended up getting an offer off market for about $4.6 million we made close to $2.2 million in a matter of 18 months. Now, none of us really wanted to take it, because we did want to do this project, but that was equal to the amount of returns that we would have received from cash flow for the next seven years. Think about it. We made seven years of cash flow in one deal. That's 84 months of cash flow. Why would we wait seven years to make this much money? If we could go ahead and do that today, you start looking at the time value of money. I'd rather have the money now. Now, people are always like, Okay, well, yeah, but if you sell, then you're going to have to pay taxes or capital gains tax. And yeah, I'll just do a 1031 exchange and avoid those taxes altogether. At least kick the can down the road. Either way, you only pay capital gains tax on the actual gain, and it's only 20% so we're getting seven years of cash flow today. Even if we did decide to pay the taxes, we're still making more money than we probably would over four or five years. The other objection I hear to this strategy is, oh, well, now you've got to go out and find another deal that's not that hard. We can take this money and go buy a strip center at a 6% or even 7% cap rate. With all of our equity that we've just created, we're now getting even better returns than we initially would have gotten. So here's another example, this time on a much, much smaller deal. I bought a building for $435,000 there's just a 2200 square foot retail building, actually right down the road here in East Nashville, single tenant retail All right now, before we even closed the deal. I signed a lease on we went out and found a tenant. Because of that lease, it appraised for $650,000 so we flipped it pretty quickly, for about 625 grand, almost $200,000 in about a three year period. And the only change, literally, the only thing that we did with that property was the lease. The rent on that thing was going to be roughly three or $4,000 gross. That's before my mortgage and, you know, some admin expenses, right that we might have at the asset level. So let's say we were going to net $2,000 a month. It would have taken me 100 months over eight years to make that same $200,000 in cash. Why in the world would I invest for cash flow? I first got started where most people are starting out today, I didn't have anything as a commercial real estate broker, I would roll my commissions in to any deal that I was willing to do, and that would be considered my equity, so not even technically, money out of pocket. That's why I'm in the position that I'm in today, where I could sell everything, if I chose, and invest in Walgreens or Starbucks and retire with well over $20,000 a month in passive income based off of pretty low cap rate deals. Let me show you how this strategy works. A business partner and I bought a piece of dirt, we spent $618,000 to buy it. Actually, a local agent ended up bringing us this deal. We rezoned it and then flipped it for about $1.575 million and change. So we made about a million dollars on that. We then did a 1031, exchange into something that was making passive income. So we were able to go from 200,000 to $500,000 each. And I personally took the money to build out my self storage facility in Chattanooga. So you're not choosing between cash flow or this forced value add appreciation strategy. Forever you do a value add first to build the capital base, then you can afford to invest for cash flow later, that self storage facility is. Going to net me $15,000 a month. Now imagine if I had tried to invest that 100 grand to get 15,000 a month. It wouldn't work like that. Now, if you've got $10 million in cash, just invest for cash flow. Go buy a Starbucks, buy a Chase Bank at Chick fil A. Those are perfectly safe investments with stable returns, and that's ideal, because if you invest and you get 567, 8% returns. You're making $800,000 a year, right? That more than supports your lifestyle, gives you more than enough money to set aside pay for the kids college fund and buy more buildings if you want to. Most people don't have $10 million in cash, all right, so if you're starting with $100,000 or if you're like me and have literally nothing, this is the way to go. So why is nobody talking about this strategy? I just think that it's most people don't realize that this is actually an option. It's not a thing that you can do in residential. So nobody really talks about it in the world of real estate, unless you're in commercial. Already in residential, you can't just sign a lease and expect the building to go up in value. As a result, you can renovate it and flip it, maybe add a bathroom or add a bedroom, and it'll be worth more, but that's usually a lot of work with a capped upside. In commercial real estate, the leases are treated like an investment, not just the building, so you force the equity, you can sign a lease and create that appreciation literally out of nowhere in some of the examples that I shared previously, that's all that we did. But in residential, you're basically just buying the value of the land and the property, whereas in commercial, you're doing that plus you're buying the income that it produces. So one other way to look at it is this, if you're valuing a business, you're buying it based on cash flow. That's why we talk about you're buying it at three to five times. EBITDA in commercial real estate. It's very, very similar, and because of that, you get these higher investment opportunities on the commercial side that you simply cannot get out of residential real estate. Now if you want to learn how to actually identify and execute value add deals like these, I've put together a complete breakdown of my entire process in the CRE accelerator mastermind. It's the group that I wish I'd had access to when I was first getting started in commercial real estate. You'll get access to my exact playbook to find fund and close your first or your next commercial property. And if you're interested, those details are in the description below. I would love to work with you, but if you're not ready for that, if you just want to know more about how all of this works, check out this video next where I'll show you how to run the numbers on commercial properties.