American businessman Robert Kiyosaki is best known as the founder of the Rich Dad Company. Through it, Kiyosaki provides finance and business education. He is also the author of over 25 books which have sold over 27 million copies sold worldwide.
One of Kiyosaki’s biggest pieces of business advice is, ‘Don’t save money, invest it’. Specifically, he recommends investing in real estate. Kiyosaki says that real estate investment has 4 main advantages:
1. Monthly income
2. Tax advantages
3. Depreciation (another tax advantage)
4. Capital gains
Tips for real estate investment
Kiyosaki also offers a number of tips for real estate investment:
- Identify the Right Area – Markets trend up, down and sideways. Unlike the stock market, real estate trends are slower but easier to follow and predict. Investors should look for markets that people are moving into. In areas that have been down for years, but are coming back, low prices make them ideal investments.
- Start Close to Home – Kiyosaki says, “I bought my first investment property on another island in Hawaii. For two days a week, I was flying back and forth to the property, a big mistake. Instead, find a property close enough to walk to or drive to.”
- Find the Right Deal – Once you find the right area, you then find a property. You need to look at many properties to find the right deal. The property doesn’t need to be perfect. Kiyosaki advises investors to, “Look for the best area with the ugliest house.”
- Use Options – Kiyosaki refers to real estate down payments as ‘options’. For example, if you use a $10,000 down payment (or option) to purchase a $100,000 property, you’re using $90,000 of the bank’s money. If the property’s value rises to $120,000, you sell your ‘option’, make $20,000 in profit, but still only owe the bank $90,000.
- Try ‘speculation’ – Kiyosaki uses options to ‘speculate’ on pre-construction (off-the-plan) purchases. If you use $1,000 to purchase an option on a $50,000 property, in a few years, the completed property could be worth $100,000 or more. You then sell your option and make a nice profit.
- Find the Right Broker – Not all brokers are equal. Many don’t work with investors and don’t understand an investor’s needs. Brokers who are also investors understand the investor mentality and look at the area first, then the properties. When you find a good broker, compensate them well.
- Use Debt – In 2007 when the US real estate markets went down, Kiyosaki and his partners borrowed half a billion dollars and invested in real estate. in 2014, they refinanced from 5% to 2.5%, cutting their debt in half and freeing up more cash.
Real Estate is the Best Investment
Kiyosaki believes that investing in real estate is superior to saving money. He says that Debt and Taxes makes the rich richer. By borrowing money and using debt, you get cash to buy real estate. Also, when purchasing real estate, you can make millions of dollars while paying few or no taxes.
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