Rich dad poor dad investing in real estate
I have money work for me when I buy rental properties and the tenants pay me rent. I have a property manager who takes care of the properties and I have to do very little work if any. This is the idea of passive income. This is the main point of the book that motivates many people and a great idea to take with you.
One of the worst pieces of advice from the book One idea in the book that many marketers have adopted is that a house is not an asset. The book says that you should not count on the house you live in being an asset because it costs you money. This is some of the worst advice I have ever heard.
The book goes to a lot of effort to show why a house is not an asset and changes the definition of an asset that banks and accountants have used for centuries. A house is an asset, anything with a value that can be sold is an asset. Is it a good investment? Sometimes, but not always but an asset does not have to be a good investment to be an asset. The loan against the asset is the liability. A house does bring in cash flow because you are not paying rent.
That is how landlords like me make money. Even Robert admits a house can be an asset if it makes money when you sell it. It is an asset sometimes and a liability other times? This makes no sense. How is he qualified to make up the definition of an asset? When you rent, the rent will keep increasing with inflation. The mortgage will stay relatively the same with a fixed-rate loan.
This is a massive advantage over time. The value of the home goes up over time with inflation as well. Buying a house to live in can be one of the best ways to build wealth when you have little money. You can buy with very little money down, there are amazing tax advantages , and you can create instant equity by getting a good deal.
The video below goes into the details on buying verse renting homes. Are there better books? I own 23 rentals now and have flipped over houses in my career. I learned how to invest in real estate through a mix of books, online resources, my father, and experience. While Rich Dad Poor Dad was motivational, other books had much more information in them about actually investing. After I found success in real estate, I also wrote a book about investing in rentals.
I wanted to make my book the complete opposite of Rich Dad Poor Dad. I packed it full of as many details as I could about how to invest in real estate. I also did not hold back any secrets. There are more than reviews currently on Amazon for the book!
Conclusion Rich Dad Poor Dad is a very motivational book but not a very good guide. It lacks the details to actually do what the book is motivating someone to do. I am willing to bet this is how most of you think about rentals. Unfortunately, this is wrong. We Buy Income Property for Appreciation This is something sophisticated players figure out sooner or later.
The best way I can illustrate this to you is like this: Suppose you have a small six-unit apartment building. You bought it five years back. You financed percent of it because you read articles by Ben Leybovich. Nothing special. But nothing wrong with it. Rich Dad would approve. You get an offer to sell it. You worked hard to get the building. You like having it. And with no money in the deal, to boot. But you realize that between the appreciated equity and principal paydown, you would put in your pocket a x15 multiple on your annual cash flow if you do sell.
Do you sell? Or would you hold and keep the cash flow? This is as true with money as it is with food and relationships. I promise, I am not a jerk—you may simply be reading my stuff at a time that is not appropriate. Time value is the concept. Indeed, you better plan on making much more cash flow 15 years from now. But those are more than I want to get into today. So, Do You Sell? I did. I sold that six-unit. I had bought it about five years prior. I financed it percent.
Mathematically, the reason I sold is because doing so represented infinitely higher IRR than not selling. In fact, this was about a 40 percent IRR in five years.
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