What shall it profit a man or woman to have high yielding investments but zero cash flow?
So Tiwa is on her first job out of school and has just been paid a year end bonus. She’s all about saving and investing, so when she hears of how land prices in Lekki have jumped for the early invesors, she makes a quick move to purchase some real estate.
Some months down the line, the investment is doing very well but she has an emergency and needs some cash that exceeds her emergency savings.
Unfortunately, investments in bare land don’t pay any dividend. The only way to get cash is to either sell it, lease it or do some business on the land. Now, those aren’t things that can often be done at the snap of a finger.
Also, it should be noted that she only needs some money but it isn’t easy to sell a fraction of a piece of land.
So with no cash flow from her investments, she has a crisis situation and may have to take a high interest loan, sell the land at a huge discount or more embarrassingly go begging.
Often, investments with the highest rate of return would require you to tie up your funds for a long time. And while it’s important to maximise your returns, you need to also have some investments that generate some cash flow.