In his book "Rich Dad's Investments," global finance guru Robert Kiyosaki offers some guidance for real estate investors, which he calls "seven steps to your first real estate win.".
“Over the years, I’ve come to appreciate that real estate investing makes everything better. Unlike other investment vehicles, real estate operates under its own set of rules, and the game is tilted in favor of investors for many reasons,” says the author of “Rich Dad Poor Dad,” one of the world’s best-selling books, which argues that people’s success depends, above all, on their financial education.
“People think you need a huge amount of knowledge to succeed in real estate. They think you need a fantastic university education, or to have everything figured out before you start. Nothing could be further from the truth. In fact, I started my real estate education as a child, playing a children's board game,” he says.
The seven steps to real estate victory state:
1. Buy Your Own Property First.
If you've never bought real estate, I always suggest buying your own place to live first. This will give you a front-row seat to everything you need to know about real estate investing. You'll never know all the nuances until you experience them firsthand. Plus, financing is easier, and you'll get the best tax breaks. A few years later, you can upgrade to a new house if you want, keeping your original property as a rental for cash flow.
2. Find an Area Close to Your Home.
Especially if you're a beginner, it's important to focus on an area close to your home, one you know well. Drive, walk, or bike through that area regularly. Is it growing or declining? Are there many "For Sale" or "For Rent" signs? Also, find two or three real estate agents who operate in that area. You can find out simply by seeing who has the most "For Sale" signs up. Call these agents and ask them about the area. What has sold recently, and for how much? What are properties rented for, and who rents them here? How long do properties typically stay on the market before selling?
Why do you want to do this? Because when a property comes on the market, you'll know very quickly whether it's a good deal or not, and you can move quickly. If you know an area well, you might even find out about a new property before it goes on the market, giving you a real edge over the competition.
3 - Start small.
I can't stress this enough: when you're starting out, go small. Invest a lot of time and a little money in your first deal. Most people do the opposite: they invest very little time and a lot of money and wonder why they're losing. They want to keep their risk low because they're on a learning curve. Why risk a lot when you know there's so much to learn?
4 - Know what you can afford.
First and foremost, this means figuring out how much it will cost you for the amount of cash flow you want. In other words, how much will it cost you to earn a 15%, 20%, or 30% return on your cash investment?
Second, remember that your primary investment goal is to improve your financial standing. So ask yourself these questions about a potential purchase:
– If the tenant moves out and the property remains vacant, how long can I afford it?
– If there's an expensive maintenance issue, can I afford it? This is another reason to start small. If my quadruplex friends had started with a 12-unit apartment building, that driveway would have cost them significantly more and likely caused them a much bigger financial problem.
5- Look for Problem Properties
. It's true: one of the best search strategies is to look for a property that someone else has moved away from due to a problem. Figure out how to fix that problem, and you can instantly increase the property's value.
One of my favorite examples is when Kim and I came across an apartment building in Phoenix, Arizona, with a 37% vacancy rate—a pretty high number. No one else would touch it. But we asked ourselves, “How can we solve this problem?” It turned out the property was being run like a hotel: people could rent a fully furnished apartment for anywhere from a week to a year. A not-so-small problem: no one wants to be in Phoenix in the summer, so most of the units sat empty during those months. To make a long story short, we did our research and converted the property from short-term hotel rentals to long-term rental apartments. The vacancy rate dropped from 37% to 3%, and the property value skyrocketed. We were winning in both cash flow and capital gains!
6. Expect to Make Mistakes.
You’re bound to make mistakes—everyone does! Just remember that mistakes aren’t setbacks; they’re steps forward in the learning process. The fact that mistakes happen is one of the reasons why positive cash flow is important from the start, because it can help cushion those mistakes.
For example, two friends recently bought their first investment property: a four-story house. A month after taking possession, the city issued a citation requiring them to pave their driveway. They were able to pay for this unexpected expense with their cash flow. This meant their property was paying for their education, not themselves personally.
7. Practice and Hone Your Patience.
Your best investment strategy for 2021 and beyond isn't to buy a property and make a one-time profit, but rather to turn it into a rental property that will generate a continuous cash flow directly into your bank account every month.
Focus on the long game when it comes to real estate investing; that means buy and hold. The same goes for choosing the right investment opportunity: if something seems too good to be true, it probably is. Don't be in such a rush to get your first property, and don't ignore your instincts.
Real estate, like many other industries, is dynamic. It's a living, breathing force. If you have limited investment experience, be sure to remain conservative as you grow in knowledge and confidence. Once you gain a better understanding of the intricacies of real estate investing, it will be much easier to stay abreast of new developments.
I firmly believe that real estate investors who can adapt will thrive and position themselves well ahead of the competition.
Source: MY RICH DAD'S INVESTMENTS
