Financing and partnerships
Why I Keep Buying Real Estate Instead of Small Businesses
I own a resort, a PM company, and hundreds of rentals. Here's why I accept lower cash-on-cash from real estate and still think it beats buying small businesses.
There are a lot of people online right now (big, big names) talking about how you buy up small businesses on seller financing, build a ton of cash flow, and why that's a better investment than real estate.
Related reading: Cash Flow Isn't Dead in 2025: You're Just Structuring Deals Wrong
I agree with part of it. Small businesses do have a tendency to cash flow more. Many of my own businesses, dollar for dollar, cash flow greater than my real estate does. That's just true.
But there's a very specific reason I keep buying real estate, why I think you need to in 2025, 2026 and beyond, and why you should actually expect a slightly lower cash-on-cash return from real estate and be happy about it.
If you're new to this channel: I own a resort. I own a sales and marketing company. I own an education company. I own a property management company. I also own a whole bunch of multifamily: hundreds and hundreds of rentals. I've bought a majority of them, and sold a few of them, on seller financing. So I'm not arguing from one side of the fence. I'm standing on both.
The Small Business Case, Fairly Stated
What we're seeing right now is people like Codie Sanchez, or my good friend Brian Luebben, buying up small businesses from owners who are closing up shop around the country. There are a lot of these owners, and instead of closing the door, they sell: seller financed.
That's not a knock. That same method is how I've bought the vast majority of my real estate portfolio. Creative finance is what makes the world go around.
And the appeal is obvious. If you're starting out in small business, you can get in with low or no money. You're buying a revenue stream, you're typically getting a pretty good chunk of income, and the terms are yours: low to no money down, sometimes a few hundred dollars, sometimes zero dollars, seller financed.
What people have found is that they really like having a high income with as little resistance as possible. That's the entire pitch when someone says, "we don't actually like to buy real estate, because we're all about the cash flow, and cash flow is king."
The Mistake: Confusing Cash Flow With Equity
Here's what I think they're missing. When you buy that small business, you're buying a revenue stream. What you're not buying is the equity growth you get in real estate.
Now, to be fair to their argument, they have a real point about small real estate. You buy a property for $400,000 and it cash flows $500 a month. You spent $400,000 for about six grand a year of income. That's not a great trade, and honestly, that is not going to get you to financial freedom. If you're buying smaller properties (single family, small multifamily) you're just not getting much income for a very high dollar amount. So you have to do deal after deal after deal after deal, and what people find is that it's a grind. Meanwhile you've got maintenance, you've got tenants. There are real problems with managing multifamily.
Related reading: Why Single-Family Rentals Stopped Working (And What to Buy Instead)
You resolve that by buying bigger buildings. And if you're using creative finance, you can use the same structure to buy the bigger building that you'd use on the small one.
But here's the advantage that never shows up in a cash-on-cash comparison. If I buy that building for $400,000 and the tenant moves out: that building is still worth roughly $400,000.
As you get into larger multifamily, as the income goes up, as you become a better manager, your business is worth more. The inverse is also true: if people move out, your income lowers and it's worth less. But the beautiful thing about real estate is that it doesn't go to zero and it doesn't disappear when you're done. There's always a buyer for real estate. There's intrinsic value.
You do not have that in a business. There are exceptions: a laundromat, say, where if the laundromat stops operating there's still underlying real estate. But if you don't own the building, the landlord has the asset. You no longer have anything. The business has closed down.
Same Cash Flow, Very Different Net Worth
I have friends who have made phenomenal income buying small businesses, and today they're worth a couple million dollars. Genuinely great outcomes.
I started the bulk of my portfolio five years ago. In a relatively short amount of time I've built over a $5 million net worth: while our cash flows are about the same.
So I may have the larger global business, but our monthly cash flow lands in a similar place. The real estate was harder to build. It was more effort. I needed more systems and more processes. But I solved for that by buying larger deals.
And here's the piece that closes the argument for me. When they're buying businesses seller financed at zero out of pocket: I can do the exact same thing on a building. Real estate is a business, and you can buy them zero out of pocket too.
Which means we're both buying assets with zero out of pocket. Mine is backed by real estate. Theirs is not. They always have to work and be active at their job, or they have to flip it and sell it to the next person. They maintain the active job.
The Part Nobody Mentions: Businesses Are More Work
Every company I have (and I mean every company, the resort, the property management company) requires astronomically more employees, more inputs, more management, more people, and way more headache than the real estate.
What a lot of the online gurus brand is "we don't have to deal with tenants and toilets and taxes and buildings and roofs and maintenance."
Turns out most of that stuff is actually very easy to systematize, and there's a ton of fantastic software that's been optimized specifically for it. It took me a few years to absolutely master that to the point where a lot of it runs on autopilot. Now I get to participate in the projects I want to participate in, when I want to participate in them. Otherwise we have systems and processes, just like any other business, and we run the business without physically being in the business.
I'm not replacing toilets. I'm not replacing roofs. I'm not contacting tenants myself. I have a team that's paid very handsomely to do that.
And I have financial freedom through my real estate. It only took a few years to build, and we have millions of dollars of net worth behind it. If I ever wanted to get out of real estate, I'd sell it for roughly three or four times what a lot of these folks will sell their small businesses for.
Do This Drill in Your Market
Here's a basic exercise that changed how I think, and I want you to actually do it.
Drive your market. Wherever you live, the next time you're out and about, consciously look around and count how many buildings are physically in your market.
I know that sounds simple. Do it anyway. Look around and go: someone owns each and every one of these buildings, and most of them probably aren't losing money on them. You look at a retail center. You look at an office. When you start looking at real estate, it's absolutely everywhere.
You can't own it all. Which means I don't need to diversify into one small business and then another small business, and learn this industry and that marketing trick and the ins and outs of a dozen different sectors.
Within real estate, I focused on entry-level multifamily housing. That was my niche. There is an unlimited amount of housing needed in this country and available in this country. I didn't have to branch out and learn 50,000 things. I had to get really good at one thing.
That one thing stores money fantastically. It adjusts for inflation. It increases in value over time. It rewards you for being a better operator than the last person. And it does give you cash flow: you just have to accept that you're buying a little bit bigger than most people think they need to start.
Key takeaways
- Small businesses often do cash flow more per dollar. That part of the argument is correct, and several of my own businesses prove it.
- Real estate has intrinsic value. If the tenant moves out of a $400,000 building, you still own a roughly $400,000 building. When a business closes, and you don't own the underlying property, you own nothing.
- Both can be bought seller financed at zero out of pocket, but only one of them leaves you holding a hard asset afterward.
- Five years of buying real estate built over $5 million in net worth on cash flow comparable to friends who bought businesses and are worth a couple million.
- Every business I own takes more employees, more inputs, and more headache than the real estate does. Tenants, toilets and roofs are far easier to systematize than the gurus admit.
- One niche beats ten. Entry-level multifamily is unlimited in supply of opportunity, so you get good at a single thing instead of learning a dozen industries.
That's the real mindset difference. Active businesses take more of your time, they're more variable, and they carry more stress. If you want financial freedom on semi-autopilot (and every business, real estate included, is somewhat active) then you want to control as many variables as possible and be backed by the most stable asset possible.
Humans need housing just like they need food. Be a provider of something that is an absolute necessity and that is backed by something tangible and real.
By buying buildings, and by buying hundreds of them, I built financial freedom in just a few years. Anyone can copy it. There is nothing special about my strategy.
Watch the full video above for the whole comparison. If you want to learn how to do this, there's a free Skool community linked in original episode description, plus our free course on getting started in multifamily investing, and you can learn about my mentorship at mentorship overview.
Read the episode transcript
0:00 if you want to have Financial Freedom 0:01 and you want it to be on a semi 0:03 autopilot real estate and all businesses 0:05 are somewhat active humans need housing 0:07 just like they need food be a provider 0:10 of something that is an absolute 0:11 necessity that is backed by something 0:13 tangible and real I'm seeing it a a lot 0:16 of it there are a lot of people online 0:18 big big names talking about how you buy 0:20 up small businesses seller finance build 0:22 a ton of cash flow and why this is a 0:24 better investment than real estate now 0:26 while I do agree that small businesses 0:28 have a tendency to cash flow more and 0:30 many of my businesses dollar per dollar 0:32 will cash flow greater than real estate 0:35 there is a very specific reason that I 0:36 continue to buy real estate right now 0:38 why I think you need to in 2025 2026 and 0:41 Beyond and why you actually expect a 0:44 little bit lower cash on cash cash flow 0:47 return from Real Estate now right now 0:49 what we're seeing is Big names like Cody 0:51 Sanchez or my good friend Brian lubben 0:53 we're buying up small businesses from 0:54 owners who are closing up shop around 0:56 the country and there are a lot of these 0:58 instead of closing their door they sell 1:00 them seller finance in fact this same 1:02 method is how I've bought a vast 1:03 majority of my real estate portfolio 1:06 here is problem number one by the way if 1:08 you're unfamiliar with this channel I 1:09 own a resort I own a sales and marketing 1:11 company I own an education company I own 1:13 businesses I own a property management 1:16 company I also own a whole bunch of 1:18 multif family in fact hundreds and 1:20 hundreds of rentals I've bought a 1:21 majority and sold a few of these on 1:23 seller financing create a finance is 1:26 what makes the world go around if you're 1:27 starting out in small business you can 1:29 get in load or no money what people have 1:32 found is hey we really like having a 1:33 really high income with as Little 1:35 Resistance as possible this is what a 1:37 lot of people online are talking about 1:39 when they're saying hey we don't 1:40 actually like to buy real estate because 1:42 we're all about the cash flow and the 1:44 cash flow is 1:46 key this is the big mistake I think 1:48 they're making so while you can buy 1:50 these small businesses and you're buying 1:52 a revenue stream and you're typically 1:54 getting a pretty good chunk of income on 1:56 your terms could be low to no money down 1:59 often times times you're buying them few 2:01 hundred, down maybe even zero dollar 2:03 seller 2:04 financed what you're missing out on 2:06 though is the equity growth you see in 2:08 real estate see in real estate you buy a 2:11 property for 400,000 here's the problem 2:13 they have you buy a property for 2:14 $400,000 and cash flows like $500 a 2:16 month you spend 400,000 for like six 2:17 grand a month of or a year of income 2:20 that's not that great of a trade and 2:22 it's truly that's not going to get you 2:24 to Financial Freedom now if you buy 2:25 bigger buildings you can resolve for 2:27 this and if you're using creative 2:28 Finance you can use the same Z to buy 2:30 that building but if you're buying a 2:32 smaller property single family multif 2:34 family you're just not getting a whole 2:36 lot of income for a very high dollar 2:39 amount so you have to do deal after deal 2:41 after deal after deal what they find is 2:42 It's a Grind and then you have the 2:44 business where you have maintenance you 2:45 have tenants there are real problems 2:47 with managing multif family here's the 2:49 advantage if I buy that building for 2:52 $400,000 and the tenant moves out that 2:54 building's still worth roughly uh let me 2:56 see about $400,000 now as you get into 2:58 larger multif family as as the income 3:00 goes up as you become a better manager 3:02 your business is worth more but you have 3:05 and inverse is true if people move out 3:07 your income lowers it's worth less the 3:10 beautiful thing about real estate is it 3:11 doesn't go to zero and it doesn't 3:13 disappear when you're done there's 3:15 always a buyer for Real Estate there's 3:16 intrinsic value you do not have that in 3:19 a business there are some businesses 3:20 like a laundry mat if the laundry mat 3:23 stops operating there's still underlying 3:25 real estate but if you don't own the 3:27 building the landlord has the asset you 3:29 no longer have anything the business has 3:31 closed down now I have friends who have 3:34 made phenomenal income by buying small 3:37 businesses and today they're worth a 3:38 couple million dollars I started a bulk 3:41 of my portfolio five years 3:43 ago I have built in a relatively short 3:46 amount of time over a $5 million net 3:48 worth while our cash flows are about the 3:50 same so while I may have the larger 3:53 Global 3:54 business our cash flow is still the same 3:56 it was harder to build and it was more 3:58 effort to build in real estate I had 4:01 more systems more processes but I solve 4:04 for x by buying larger deals see what I 4:06 found is that when they're buying 4:07 building seller finance Zars out of 4:08 pocket if your cost out of pocket is 4:10 zero and you can do the same thing on a 4:12 building that you can't a business 4:13 because a real estate is a business you 4:17 can buy them $ Z out of pocket which 4:18 means we're both buying assets Z out of 4:20 pocket mine is backed by real estate 4:23 theirs is not they always have to work 4:26 and be active at their job or they have 4:27 to flip it and sell it to the next 4:29 person 4:30 they maintain the active job every 4:33 company that I have and I mean every 4:34 company the resort the property 4:36 management company they require 4:39 astronomically more employees and more 4:41 inputs and more management and more 4:42 people and way more headache than the 4:45 real estate what I see a lot of these 4:47 online gurus try to brand is like oh we 4:48 don't have to deal with tenants and 4:49 toilets and taxes and buildings and 4:51 roofs and maintenance turns out most of 4:53 that stuff is actually very easy to 4:55 systematize and there's a ton of 4:56 fantastic software that's been optimized 4:58 for it it took me a few years to 5:00 absolutely master that to where a lot of 5:02 it is on autopilot I get to participate 5:04 in the projects that I want to 5:05 participate when I want to participate 5:07 in them otherwise we have systems and 5:09 processes just like any other business 5:11 where we're able to run our business 5:12 without physically being in the business 5:14 I'm not replacing toilets I'm not 5:16 replacing roofs I'm not contacting 5:17 tenant myself I have a team that's paid 5:20 very handsomely to do so and guess what 5:22 I have Financial Freedom through my real 5:24 estate it only took a few years to build 5:27 and we have millions of dollars of net 5:29 worth in fact fact if I ever wanted to 5:30 get out of real estate I would sell it 5:32 for roughly three or four times what a 5:33 lot of these people will sell their 5:34 small businesses for the other huge 5:37 Advantage Is that real estate do this 5:41 drill drive your Market wherever you 5:43 live consciously look around the next 5:46 time you're out and about driving look 5:47 at how many buildings are physically in 5:50 your Market I know this is really basic 5:51 but do this look around and go okay 5:53 someone owns each and every one of these 5:55 buildings and most of them probably 5:57 aren't losing money on the these 5:59 buildings you look at a retail Center 6:01 you look at an office you when you're 6:03 looking at real estate there is is 6:04 absolutely everywhere you can't own it 6:06 all which means I don't need to 6:07 diversify into one small business and 6:10 another small business and learn this 6:11 and learn this marketing trick over here 6:13 and learn the ins and outs of a bunch of 6:14 Industries within real estate I found 6:17 that I focused in on entry-level multif 6:19 family housing and that was my Niche 6:21 there is unlimited amounts of housing 6:23 that is needed in this country that is 6:24 available in this country I didn't have 6:26 to Branch out and learn 50,000 things I 6:28 had to get really good at one thing it 6:31 stores money fantastically it adjusts 6:33 for inflation it increases in value over 6:36 time it rewards you for being a better 6:38 operator than the last person it does 6:40 give you cash flow you just have to 6:42 accept that you're buying a little bit 6:43 bigger than a lot of people think they 6:45 need to 6:46 start this is the big difference between 6:49 business and real estate business I know 6:52 they're both business but there there 6:53 really is a different mindset behind 6:55 them the active businesses will take 6:57 more of your time they will be more 6:59 variable they will take more stress if 7:01 you want to have Financial Freedom and 7:03 you want it to be on a semi autopilot 7:05 real estate and all businesses are 7:06 somewhat active but if you want to 7:09 control as many variables as possible be 7:11 backed by the most stable asset 7:15 possible humans need housing just like 7:18 they need food be a provider of 7:21 something that is an absolute necessity 7:23 that is backed by something tangible and 7:26 Real by buying buildings and by buying 7:28 hundreds of them them all over the 7:30 country I built Financial Freedom in 7:32 just a few years anyone can copy it 7:34 there's nothing special about my 7:35 strategy you guys want to learn how to 7:36 do it I have a link below to a free 7:39 school Community you guys can absolutely 7:40 check that out I invite you to that I'm 7:42 excited to see you guys there this is an 7:44 episode join that school Community for 7:46 free click link below like subscribe 7:47 I'll see you on the next episode
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