Author: Alex Anderson
Robert Kiyosaki, author of the Rich Dad book series, has said more than once that you don’t have to have money to make money. In “Cash Flow Quadrant†however, he reveals how much money he paid for his first investment condo. What if you want to buy a condo but you don’t have a few thousand spare dollars lying around to make it happen?
You can still make your purchase. The trick is, you just have to think about things a little bit differently.
If you have not seen the movie “Schindler’s List,†you probably should. Not only is it a great bit of social consciousness, its writers did a good enough job on Schindler’s character to give you a glimpse into his business know-how.
The man wanted to build a factory because he knew it could make him a lot of money during the war. Thing was, he didn’t have the capital to build that factory.
But the Jewish community did.
He went to them and presented his idea about how, in return for their investment capital, they could take some of the goods produced and sell them on the black market. He talked to a lot of investors. He raised a lot of money.
You can do the same thing, and indeed a lot of people do. If you see a good deal on a building and you haven’t the spare millions lying around to purchase it, put together a cooperative to buy the property. Even if you receive only 10 percent of the property’s earnings, that will be a nice, tidy sum if it’s the right property.
That is why you shouldn’t content yourself with starting too small.
According to Ken McElroy, who authored Rich Dad’s “The ABC’s of Real Estate Investing,†there is nothing wrong with small bits of real estate. He simply says that there is no reason to relegate yourself to them out of fear that you don’t have the skills to go larger, because it doesn’t really require more skills. You wind up outsourcing a lot anyway.
What a larger chunk of real estate will do, however, is allow you to interest more investors, as they stand to make more money off the deal. A larger piece of real estate will also be very unlikely to slump into zero occupancy.
As McElroy says, if you rent out a single-family unit and that family moves out, you have an occupancy rate of zero, and the property becomes a liability until you can rent it again. If you own interest in a 50-family building and 10 families move out, you still have an occupancy rate of 80 percent. The property is still an asset. You’re still making money. And you know you stand to make more again when you get those 10 units refilled.
All of that doesn’t even begin to take into account the relative ease of getting a bank loan for the purpose of purchasing an investment property. The bank knows they can make money off that property if you default, regardless of your credit history.
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How You Can Invest In Real Estate
Many Americans aren’t going to end up with money to retire on. These days, it’s a sad fact. Instead of complaining about that reality (and the injustice of it all) the best action someone who wants to retire can do is simply make sure they aren’t the average American. They need to take steps to make sure they will have the income to enjoy their retirement and be able to pay their bills, including their ever-increasing medical-bills.
The most effective way to avoid being one of these Americans who wind up working at some remedial job through their retirement, based on the opinion of Robert Kiyosoki, author of the “Rich Dad Poor Dad†book series, is to invest in real estate.
Buying investment property is an excellent way for people to prepare for our retirement because it supplies a great benefit called “passive incomeâ€. After someone has done the preliminary work, passive income keeps coming in without a lot of effort. A typical worker gets paid only for the time he puts in.
A real estate investor, after developing her system, makes money for keeping it running. And keeping it running, if she been very clever about it, will involve paying his employees to do the job of checking up on them every now and then.
A best thing about passive income (such as from investment properties) is, the more time the investor keeps them, the more ROI they should make for him/her, with less and less effort on the investor’s part. It’s the nearest thing to magic we will ever find in the world of finances.
It sounds attractive, but one should never simply take the plunge without looking first. Although it is all very learnable, there’s quite a bit to learn when you are thinking about real estate investing – things like comprehending economics and the laws related to real estate.
The most important concept to understand, however, is one’s own personal limitations. The person who knows where to locate the information she wants is much better off than the person who remembers tons of facts and formulas around in his/her memory.
In the book “Cash Flow Quadrant,†Robert Kiyosaki teaches newbie investors to raise their income as well as their knowledge. Mr. Kiyosaki writes of creating a business system that will set up and left alone, freeing up the owner to move on to the next deal instead of spending all his/her time babysitting his/her business. The next step is to continue that real estate education and start to look around for specialists to employ and property to acquire.
Robert Kiyosaki also refers to this change as moving from one part of the cash-flow-quadrant to the next. He emphasizes that, the 1st step someone needs to take toward transforming his or her life is changing the thinking process. If a person changes the way he thinks about money, then he will wind up in a much better position to change his relationship with it.
The way people think determines the actions they take throughout the day, and those actions determine the level of their success. The main value of studying books like Robert Kiyosaki’s “Rich Dad, Poor Dad†series – brings you closer to a new paradigm about things. When investors see how easily it is to establish new skills and acquire better knowledge, they are virtually impossible to stop.
Alex Anderson Uses The Minnesota MLS To Help Her Clients To Find Minneapolis homes for sale. Download A Free Copy Of “The Investors’ Rental Guide†At GreatInvestmentProperty.com.
Real Estate Investment for Retirement
  - Ben Stein
Now for some reassuring words. Of all of the columnists writing in this space, I suspect I am the oldest. This means I have seen the most economic fluctuations. This also means I am less terrified about them than younger heads.
Let me put this differently. I read recently in The Wall Street Journal that the stock market was at the time of that writing almost in “Bear Market Territory,” which is to say, down roughly 20% or more from its high. This, said the author of the piece, shows that we are about to have very bad economic times. The author helpfully noted that the market has been down into “Bear Market Territory ” some nine times since the mid-1960’s. Without doubt, this author was trying to do his best, and to serve his readers.
But here’s a relevant addendum: yes, the market may have fallen 20% or more nine times since then. But there have only been five recessions since then.
That is to say, the stock market predicts 10 out of five recessions. Not such a great record.
The truth is that while the economy is clearly slowing down we are not yet in a recession. There has so far not even been one quarter of negative economic growth, nor even a break-even quarter. We may well have one soon, but two in a row are required for the classic definition of a recession. And as I keep saying, if anyone can call anything a recession, the whole subject loses all intellectual or factual meaning. This too could happen-a real recession-but it has not happened yet.
There are still reasons for hope. Exports are phenomenally strong. Minerals and agriculture are strong. Medical is strong. The government sector is large and robust. Sadly, military must remain strong indefinitely.
The government is running an immense deficit, and this is stimulative. True, finance is in tatters, as is transportation, refining, and home building. These are large sectors. They may fall so much that they bring the economy into recession.
But think about this: somewhere out in the big wide world, there is voracious demand for minerals and commodities. That (along with speculation) explains their major price increases. It would be extremely rare for there to be a spectacular worldwide demand for commodities along with a serious fall in demand for other factors in an economy. That is, it would be rare for demand to be both rising and falling at the same time. It could happen, but it would be rare.
However, let’s assume we do have a recession. I hope we don’t, but we might. What do we do about it? What can we do about it? Just keep plugging along. Just keep buying broad indexes. Just keep a good chunk of liquid assets. None of us can control the economy. Thus, we just have to keep swimming in the roiled waters.
As we cling to our life jackets, please remember this: no recession lasts forever. I can well recall so many times in the past when every single headline in The Wall Street Journal was about some record growth of sales or profits. Then time passes and every single headline is about horrible news. Then time passes and there is mixed news, and then it’s all good news again.
Economies go through cycles. But the long-term trend is up, and people who buy broad indexes when the news is bad, if they live long enough, live to be happy about it.
Besides, what alternative do you have? If you have money to invest, yes, keep some in cash. But cash loses its value in inflationary times. In fact, holding cash over long periods – beyond what you need for peace of mind – is a surefire way to make yourself unhappy. You will lose money on it over long periods as inflation nibbles at it.
The best bet usually is what has gone down the most, and that, for now, is real estate. I got a letter from a thoughtful reader saying he was going to wait until real estate had reached its all time low before he bought. But how will he know? And how rarely does he find a home he truly loves? Even when homebuyers buy at the top of the cycle, if they love their homes, and if they can hold on, they always end up delighted.
Yes, there will be news saying housing will not recover THIS TIME. But in fact, except in really depressed areas, housing recovers EVERY TIME and goes on to pass its prior record. The real story of real estate, as my brilliant money manager friend, Phil DeMuth, says, is of failing to buy, not of staying away successfully.
The plain fact is that you don’t know when real estate will be at bottom until it’s too late. If you see a home you love, buy it now if you plan to be in it a long time. And know that the headline writers want to whip you up and make you crazy about the economy. They sell fear. Stay calm and stay well to do.
Excerpted from:
Don?t Panic – Buy Index Funds and Real Estate
NWCREI and Worcester REI are sponsoring REOs Open! tomorrow between 10AM and 4PM. Sitting on the fence, wanting to learn about buying bank owned property or wanting to buy something now with our without partners?
Come tomorrow and tour several properties, including at least one that
isn’t listed for sale currently!
What makes this different than other real estate tours? How about analysis! Not only will you walk through the properties but you’ll have experts on hand. Some of the things discussed:
- What are the ball park repair costs?
- What are likely mortgage scenarios?
- What would my holding costs be?
- Etc., etc.
In fact, you should come away with more than enough information that you should be able to offer on these properties, alone or with partners!
Go to: Northern Worcester County Real Estate Investors: REOs Open Event for more details or to register.
The Fitchburg Cashflow game follows at 5PM at James’ house.
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REOs Open!
