Robert Kiyosaki Blog

A lot of Americans aren’t going to have enough money to retire on. That is just a un happy reality of these times. Instead of bemoaning that reality (and the unfairness of it all) the best thing someone who hopes to have a healthy retirement can do is simply make sure they aren’t the typical American. We must take actions to assure they will have enough income to enjoy their life and pay their bills, as well as those increasing medical bills.

The best way to avoid becoming one of these Americans who end up working at some remedial job through their so-called Golden Years, according to Robert Kiyosoki, author of the “Rich Dad Poor Dad” book series, is to buy investment property.

Investing in real estate is a wonderful way for people to prepare for retirement because it supplies a great benefit called “passive income”. After someone has laid the ground work, passive income keeps coming in without a lot of effort. A laborer gets compensated only for the hours he puts in. A real estate investor, after setting up his system, gets paid for keeping it running. And keeping it running, if he been wise about it, will involve paying his team to do the job of inspecting them every now and then.

A great thing about passive income (such as from investments) is, the more time the real estate investor holds them, the more ROI they should make for her, with less and less work on the investor’s part. It’s the closest thing to the “Holy Grail” of the world of money.

It sounds attractive, but we shouldn’t just take the plunge. And even though it is completely learnable, there’s quite a bit to learn when one is thinking about buying investment property – things like comprehending P&L statements and real estate law. The biggest concept to learn, however, is one’s own limitations. The individual who understands where to find the knowledge he wants is far better off than the individual who remembers tons of facts and formulas around in her memory.

In the book “Cash Flow Quadrant,” Robert Kiyosaki advises potential investors to increase their cashflow in addition to their knowledge. He writes of developing a business system that can be set up and left alone, freeing the investor to move to the next step instead of investing all her time working in her business. The next step involves continuing the real estate education and start to look around for specialists to employ and investment properties to buy.

Robert Kiyosaki also talks about this change as transitioning from one part of the cash-flow-quadrant to the next. He emphasizes that, the 1st step someone needs to take toward transforming her life is altering the thinking process. If someone adjusts the way he/she processes the thought of money, then he/she will wind up in a better position to change his relationship with it.

The way someone thinks determines the actions they take throughout the day, and those actions determine their success. The primary benefit of reading books like Robert Kiyosaki’s “Rich Dad, Poor Dad” series – brings you closer to new ways of thinking about stuff. When investors see how easy it is to develop new skills and acquire better knowledge, they are virtually unstoppable.

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Investment In Property Can Help You Retire

I remember a lot of comments from readers and also from people I meet in person who tell me that they are just looking for a place to live and are not really looking for a real estate investment.

My default answer is “Why not treat your first home as an investment?”

In reality, once you buy a property, you become a real estate investor. Buying a home is often considered to be the biggest investment one can make so it’s best to treat it as a real investment — one which will give you reasonable returns if you do decide to turn it into a rental property or if you sell it further down the road.

What are reasonable returns?

Normally, when a person buys a house which he intends to live in, he does not consider how much rent he would earn if he decides to rent the property out, and whether the possible rental income would be more than his monthly amortization. It is not uncommon for a homeowner who moves up the corporate ladder or improves his situation to move to a better home but keep his first home for sentimental reasons.

Thus, if in the future, the homeowner decides to move to another house and converts his first house into a rental property, the rentals are often not enough to cover the monthly amortizations, thereby producing a negative cashflow situation.

Had the homeowner considered his first house as a real investment, he could have dedicated more time to finding a property that would fetch better rental rates which could cover the monthly amortizations, thus giving the owner a nice positive cashflow.

More often than not, factors that may affect market values and appreciation are not given too much attention by a home buyer as the primary goal is just to have a place to live in. When the time comes to sell the property, it is very likely that there is little or no room for significant profits.

At times, the homeowner may even have to sell at a loss. This situation could have been avoided had the home owner considered buying a property that was way below market value*.

*-”Market Value” is the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion.

Buying a property below market value would be in alignment with what Robert Kiyosaki often says, which is “You should make money when you buy, not when you sell”.

 Money is made in the form of equity* at the time the property is bought and the profit is realized when the property is sold. Robert Kiyosaki is the bestselling author of Rich Dad Poor Dad.

*- Equity is the difference between a property’s current appraised value or market value and the loan principal balance

The opportunity is there so don’t waste it

Everyone at one point or another will really have to buy his or her own home so why not make the most out of the opportunity? If done well, one could gain passive income in the form of positive cashflow, or a significant profit, or both. At the very least, the education one can gain from treating his first home as a real estate investment is priceless.

It is virtually risk-free

Since initially the goal of the home buyer is to have a place to live in, he would not really be concerned with holding costs associated with properties that take time to lease or sell. He/she lives in the place anyway so this makes it virtually risk-free in my opinion.

In fact, I apply the same strategy to all of the deals that I have done this year as my last fallback would be to live in the property just in case I am unable to sell or rent it quickly.

The challenge in deciding to live in one’s investment property

If one decides to live in his/her own investment property, chances are one will have the tendency to  fall in love with the property and over-improve it. I guess that’s the only risk that one should manage. Falling in love with a property can cloud one’s judgment and introduce costly improvements that one might no longer be able to recover.

If your first home is good investment, it can lead to more investment properties

If one buys his first home as an investment and not just as a place of residence, it can help ensure that more real estate investments would follow or at least it won’t prevent the homebuyer from buying more investment properties. Believe me when I say that buying a home that costs too much and is considered to be a liability can really hinder one’s ability to build enough capital to buy the next investment property. This is based on first-hand experience.

Ready to buy your first home? I wish you successful investing!

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Treat your first home as a real estate investment?

Have you realized that NOW is a GREAT time to invest in real estate, but you just don’t have the money to do it? Here are several ways you can generate cash for your next investment to make sure you can cash on the great opportunity that this market is providing.

One big Detroit Area investor, Darrick Scruggs, the owner of My First Michigan Homeand many other companies, said, “Most of your problems will disappear if you become world-class at raising money.”

Most people will read this and think that I am stating the obvious. Many of these same people will say that they don’t have any money. If they had money, they say, THEY would be raking in millions, too.

I’m here to tell you that you NEED money, but nobody said it had to be your own. I know! Many of us have heard that, too. So how do you use “other people’s” money?

Besides using your own cash, have you considered….

1. Make Money as a Middleman: You can wholesale properties until you get enough cash to do bigger, more profitable deals.

2. Borrow from a Lending Institution: Today this is not always so easy, but can be done, still. Use the money for your investments. Don’t get distracted using that borrowed money for other things.

3. Refinance Your Home: You can (a) get more money to invest, or (b) use the reduced monthly payment to make it easier to create a positive monthly cash flow from the property or other investment that you will buy.

4. Use Credit Cards: Obviously, you have to be careful with this since most credit cards charge a high interest rate. However, if you can make a quick $20,000 profit within six (6) months, would you be willing to pay around $4,000 in interest payments? (This figure comes form borrowing $30,000 @ 30% for 6 months. Most people can get better terms on their credit cards than this.)

5. Obtain a Second Mortgage: Tap into your home equity, and use that money for a killer investment.

6. Borrow from Your Retirement (401K, 403b, Roth, SEP, etc.) Account: You can use this as collateral for a loan and use this money for investments.

7. Solicit Other Active Investors: These people are always looking for ways either to have their money work for them harder or make good money without them having to do any work.

8. Use Money from Passive Investors: How many people do you know complain about their 401K shrinking? They have less control over the bigwigs at the companies overseeing mutual funds than they do you. If you know how to make them money and can show them how you are going to make them money, many of these people will feel safer investing with you. Many of these people would be delighted if you could promise them a return of 8% – 10%.

9. Team with Other Investors: Sometimes, there will be a project where you have some expertise but missing another piece of it. Other times, you might have the idea but not the money or vice versa. Find a another person who has your “missing piece.”

10. Friends and Family: This is a possible source, but be careful with this one! Really!!!

11. Borrow from a Hard Money Lender: This is similar to a credit card, but while they are expensive, they often are cheaper than a credit card; however, the repayment terms are usually shorter. This is suggested more for quick turning than it is for rentals. You can use their money to gain quick chunks of money for only a small price compared to your quick profit.

12. Buy on Land Contract: Usually the price will be higher, but you do not have to use as much of your own money. Run the numbers to make sure it works for you, but several investors got started this way.

Use these techniques responsibly. These are great ideas, but if they are used improperly, you can create some tough situations for yourself. Do your due diligence on the investment opportunity. Make sure that you have a backup plan in case your main plan backfires. These are the two (2) most common investing mistakes.

Make sure that you have a plan and that you thoroughly thought out that plan. You do not want to make a habit of using borrowed money just to lose it. We all make mistakes, but make sure you do your due diligence to reduce your chance of making them. Calculate your risk.

No matter your investment, remember this! NEVER “invest” more than you can afford to lose. That’s called GAMBLING on the Hope-n-Pray method. Save this for your fun money. Feel free to ask me more questions about that.

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12 Ways On How You Can Raise Money To Invest

In this inspiring video by the world’s leading authority in Business and Investment, Rich Dad, Poor Dad author Robert Kiyosaki reveals the … tags: robert kiyosaki asset building management assets cash
from recent posts tagged financial – blip.tv (beta)

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Robert Kiyosaki Rich Dad Poor Dad Secrets of the Rich

Investing may seem daunting for a lot of people. Maybe you have tried it once and failed, or maybe you are simply frightened of losing your money.

To avoid losing any capital, you simply need to be aware of the main pitfalls and always avoid them. The simple, reliable rules for investing are:

1. Have a plan. Always ensure that you or your financial advisor draws up an appropriate investment strategy for you that incorporates your risk profile, timeframes and financial goals. As foolish as it seems, many people plunge headfirst into investing without thoroughly working through these fundamental issues.

2. Don’t put all your eggs in one basket. Obvious advice, but many people fail to follow it. Many people think that they are on the right financial track by paying off the mortgage on their family home and then buying another property for investment purposes.

Think about it! You have put all of your financial eggs in one asset basket – property. What happens if the property market collapses? Despite common thinking that this is a safe way to invest, the outcome is very risky. You have invested all of your well-earned money into only one area.

3. Build in appropriate timeframes. There is an old saying, “When the tea lady starts to invest in the stock market, it’s time to get out.” What this means is, when the share market is so high that everyone starts to clamber on board, it has probably reached its peak.

There are two ways of successful investment timing. The first is to always pick the low-end of the market to buy and the high-end of the market to sell. This is extremely hard to do. Even the best-informed experts have trouble. The second way is to choose good investments and stay with them over the long-term (say 10 years or more) and ride the waves of the market.

For safe, easy investing, choose the second method. Do not buy into the top-end of the market and sell once it starts to fall. You will definitely lose money this way.

4. Avoid high-risk investments. These include risky business ventures, highly speculative stock, tax avoidance schemes or too-good-to-be-true propositions that promise unusually high returns.

5. Avoid borrowing for your investments. Although some financial advisors advocate ‘gearing your investments’, this can be fraught with danger. Gearing means to borrow. If borrowing for investments takes you over your 40% fixed costs margin, you will be cutting it too fine, particularly if you lose your current income level.

6. Stay with the traditional and known. The best and surest investments are fixed interest, property and shares. Although all asset classes will fluctuate over time.

Work out the optimum mix for your investment profile, have a safe plan to work with and you can’t go wrong.

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6 Rules for Investing