Robert Kiyosaki: 3 Things You Get To Control When You Invest in Real Estate
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John Csiszar
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Gary Dudak
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Robert Kiyosaki, famed financial personality and creator of the “Rich Dad” series, is a big proponent of investing in real estate to generate cash flow. According to Kiyosaki, there are three things that you get to control with real estate that are not available with many other types of investments.
In a recent blog post on his website, Kiyosaki shared this viewpoint, along with his four real estate fundamentals.
3 Things You Can Control With Real Estate
One of the main reasons that Kiyosaki favors real estate is that it offers a level of control that’s hard to find with other investments. Specifically, Kiyosaki says you can control how you will profit, the appreciation of your investment, and who you do business with.
How You Will Profit
Unlike many investments, you can choose whether you want to reap capital gains or income from your real estate investment. Kiyosaki’s investment philosophy is founded on generating cash flow, so he invests in real estate for income. But unlike a stock dividend, for example, which is determined by a board of directors and out of the control of investors, if you buy rental real estate, you get to choose how much you want to charge for rent. You can also choose to raise it at any time, as long as market conditions will bear it.
The Appreciation of Your Investment
While you can’t dictate the value of your rental property, you can most definitely do things to improve it. For example, you can throw on a fresh coat of paint, install new windows or floors, increase the square footage or otherwise modernize your property to make it instantly more valuable. This type of control doesn’t apply to “paper” assets like stocks.
Who You Do Business With
When you invest in rental real estate, you get to choose who your business partners are. For example, you have at least some say in who you will rent to, who you will borrow money from and who will manage your property, if you won’t be running it yourself. Good choices in these areas can also help maintain and enhance the value of your investment.
Kiyosaki’s 4 Real Estate Fundamentals
According to Kiyosaki, investors need to increase their financial intelligence when it comes to real estate investing. Rather than gambling on a house flip, for example, Kiyosaki stresses that you need to be a true investor. Here are his four real estate fundamentals.
Own Things That Put Money in Your Pocket
Kiyosaki’s primary investment objective is cash flow. He stresses that real estate investors should look for income first, and capital appreciation second. To Kiyosaki, any “investment” that doesn’t put cash in your pocket is a liability, not an asset, and you should be in the business of building assets in your investment portfolio.
Buy Investments That Can Stand on Their Own
Kiyosaki doesn’t believe in owning investments that rely on other investments to maintain or sustain their value. View each investment as its own, separate entity, and only own assets that are self-sustaining.
Control, Manage and Improve Your Investment
One of the main reasons Kiyosaki believes in real estate as an investment is that you have ways to control, manage and improve it. For example, you get to pick where you want to buy your property, how much you’re willing to pay for it, and how much income you can get out of it. You also can improve your property and make it more attractive to renters, thereby being able to charge even more rent. Kiyosaki says that this is where financial education is important. By knowing best how to leverage your improvements, you can maximize your income while minimizing your expenses.
Know When You Will Sell Before You Buy
Kiyosaki says that the “hard and fast rule” when it comes to real estate is that you have to know when you will sell before you buy. This doesn’t mean that you have some specific date set in the future when you will sell your property. It just means that you need to have an exit strategy in place.
For example, you may have a certain price in mind at which you want to sell, or a time based around events in your life, such as when you retire. While Kiyosaki is generally a long-term, buy-and-hold investor when it comes to real estate, he says that every smart investor should have a price or event in their mind at which point they’d be willing to sell.
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