Author of the Rich Dad book series, Robert Kiyosaki, says his “Rich Dad” swore that real estate investing isn’t rocket science. Rich Dad said it was simply an issue of using sound judgment. But we all know that wisdom isn’t, in fact, terribly typical.
According to “Rich Dad”, the lowest levels of investors are people who have simply not studied the process. They assume that real estate investing is either too risky or a scam. Others leap before they look and wind up losing money.
The smarted advice anyone can give you concerning buying investment property is simply to educate oneself. If, in your rush to “get rich”, you take action without that education, you’ll be doing yourself a great disservice. One of your most important resources is time and if you waste that, you’ll often find that the money will follow - money you have that you wind up losing, money you could’ve saved if you’d simply invested the time to study the steps to successful investing.
“That is all well and good,” you may say. You presumably will accede that studying good information is typically a helpful thing. At the end of the day, knowledge is power. “What instruction should I get?” may be what you are asking. Your second is probably going to be, “Where do I get it?”
The first thing you can do is learn some essential accounting, which isn’t as ambiguous as it sounds. Accounting is the language of finance. If you are planning on investing in a business or a piece of property or what have you, you’ll need to be able to check in on it and see whether it’ll be a benefit (earn you income) or a burden (lose your money). It sounds like logic when you think about it, doesn't it? But in order to be able to establish these things, you’ll need to be able to understand financial-statements.
There are 4 common kinds of financial statements: cash flow statements, income statements, balance sheets, and statements that express changes in share-holder equity. The latter is fairly self explanatory, and deals with the difference between at two individual windows of time. A shareholder’s equity is it’s total assets minus it’s total liabilities, basically the net worth of a business.
The “cash flow statement” is a document that specifies the cash used in making a company function properly, plus where that money came from. Wikipedia relates a business to a enormous vat of H20 which catches more of the liquid and also has pipes running out of it - into the investor’s pockets and others to whom the business owes money to. The cash flow statement aspires to explain the activity of that liquid – or in other words the flow of that money.
The income (or profit-and-loss statement) watches out for a company's income and losses due to expenditures over a given time period, as the balance sheet gives accounts for the same thing for 1 single moment in time and addresses liabilities and assets.
It all seems very straight-forward until you consider Kiyosaki's advice on telling your assets and liabilities apart from one another. He said that the bank, for instance, will declare your house as an asset. It seems rational. After all, it is a thing you own, right? Yet according to Kiyosaki's rich dad's definition of liabilities and assets, your house is generally a liability. It is considered a liability because it ultimately costs you money in monthly fees and updates. It undoubtedly is not making income for you, and up to the time it starts doing that (say, you move out and are able to charge enough rent to make you some money), then it isn’t an asset.
Not that the bank is lying to you outright. Your house is an asset on their balance sheet because it is making money for THEM.
That is the sort of thing you can figure out for yourself and ascertain whether you are losing or making money on an investment, if you make the time to get an education. Remember: Knowledge is POWER.
![[Valid RSS feed]](http://freearticlepublishing.com/images/icon_Rss.png "XML Feed For RSS"){kind=icon}
Category Rss Feed
Print
This Article
Add To Favorites