The idea of Yin & Yang is that opposing forces create balance/harmony. Pain and pleasure, night and day, sickness and health, good and evil, the moon waxes and wanes and so forth... The Chinese sage Lao Tse advocates the "middle way" avoiding extremes of one way or another.
The two concepts I would like to explore as it pertains to real estate investing are cashflow and equity.
There is a saying, "Cashflow is king, you can't eat Equity." It definitely starts with cashflow, calculating how much downpayment is required to have adequate cashflow for expenses. An unexpected expense that can't be covered by existing cashflow can cause a business to liquidate assets. Good examples are occasionally REITS and mutual funds that have to liquidate funds to cover redemptions. Although equity is a form of capital, it can be inaccessible at times.
The other perspective is explained by a different saying, "Cashflow pays the bills, Equity builds Wealth." The way to build wealth is to invest in something with a compound return and hold on to it for a long time. If one invests a million dollars in an investment compounding at 20%, in ten years it will grow to over six million dollars. Although, it's easy to understand this in concept, it's not what people are doing. The average hold time for a stock investment today is ten months compared to five years in the mid 70s. (NYSE data) That's why for most people, it's easier to build wealth in real estate than in the stock market. According to NAR, the median tenure of home ownership is 13 years and is getting longer.
So in a sense, decent cashflow enables one to hold on to an investment for a long time, and the increase in equity through principal payment and appreciation builds wealth!
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