Financial flexibility describes the ability of a firm to access and restructure its financing by avoiding financial distress in the face of negative shocks, and by funding investment when profitable opportunities arise. General finance literature as well as real estate specific studies are not able to produce consistent capital structure results based on classical research. This study empirically examines the US-REIT and US-REOC industry for different cash flow sensitivities, whereas firms make financing and investment decisions jointly subject to the identity constraint that sources must equal uses of cash. A panel vector autoregressive model is employed to account for the interdependent and intertemporal dynamics of financing, investment and operating decisions. The addition of exogenous variables allows to compare the results to former capital structure theories and provides robustness of the model.