‘Rich Dad’ Robert Kiyosaki Reveals 6 Ways To Find Investing Money
Written by
John Csiszar
Edited by
Amber Barkley
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Robert Kiyosaki, popular financial personality and founder of the “Rich Dad” series of videos, books and blog, is on a mission to change people’s mindsets when it comes to investing. The cornerstone of his investment philosophy is to generate cash flow to pay for your obligations and liabilities, primarily through the use of income-producing real estate. When many investors hear the recommendation that they should buy real estate, they instinctively say, “I can’t afford it.” But Kiyosaki wants to turn that line of thinking around, to “How can I afford it?” instead.
Here are Kiyosaki’s six suggestions for how to find money to invest in real estate.
Family and Friends
Raising investment money from family and friends is both the most accessible and the most dangerous way to go. While it’s likely that you have friends and family that are willing to help you out with your investment venture, it’s also an easy way to put strain on a relationship. If you aren’t able to provide the return your friends and family expect, or even worse, if you lose all of their money outright, it’s likely to create some friction.
Kiyosaki’s advice if you go this route is to raise money like a professional, and don’t lean on emotions or family ties to get the money. Rather, make a presentation as you would to any other type of investor, create written agreements and do your best to provide them with a sufficient return.
Seller Financing
Rather than simply unloading a property for cash, some sellers might be willing to enter a seller financing arrangement. Under this type of sale, you don’t get a traditional mortgage but rather enter into a loan agreement with the seller. This eliminates the risk of finding and maintaining renters for the original seller while guaranteeing them a steady monthly check, among other potential benefits.
From your perspective as a buyer, it removes the burden of going through the traditional mortgage process and finding enough cash for a down payment. Not all sellers are amenable to such an arrangement, but it is a potential option.
Cash Flow Financing
Cash flow financing can be a great option for raising money, because it doesn’t require you to raise a significant amount of money upfront. Rather, you promise to pay the seller back through the cash flow that you will generate from owning the business or property. In essence, you’re agreeing to borrow from your anticipated future cash flow to pay back the cost of your purchase.
As with seller financing, of which cash flow financing is a variant, not all sellers will agree to this type of arrangement.
Lender Financing
Lender financing is a more traditional type of financing arrangement, in which a financial institution provides you with the upfront cash you need in exchange for a mortgage or loan agreement in which you agree to make monthly payments.
However, particularly for business transactions, there are a wide variety of types of loans and lenders available. Depending on your needs, you may be able to structure a deal that’s uniquely tailored to your needs.
Assumable Loans
In some cases, you can buy a property by “assuming” an existing loan that a borrower may have defaulted on, abandoned or simply wants to get out of. In this case, you simply take over the payments on a property from the original owner, with the ownership and responsibility essentially just transferring over to you.
You’ll have to abide by the terms of the original contract, and that’s the key in this type of situation. You’ll have to analyze whether those terms are better or worse than you could get from other sources under current market conditions. One benefit is that you’ll likely have lower closing costs, according to Kiyosaki.
Outside Investors
One way to raise money for your investments is to pitch it to outside investors. In exchange for them putting up a down payment on a property you want to buy, for example, you’ll have to promise them some type of return. For example, you might have to promise your investors 50% of the cash flow you receive from a rental property, or a large percentage of the profit in the event you sell it.
This won’t generally work with a seasoned investor, but it may with someone who doesn’t have the time, knowledge or interest to make or manage these types of investments.
The Bottom Line
Kiyosaki’s suggestions for raising money for investment are not new in and of themselves. But his concept of changing investors’ mindsets about how to get money for investment are. By changing your mindset from “I can’t” to “How can I,” Kiyosaki says you can transform how you approach investing and get on the path to generating life-altering income over time. The steps are just an example of ways that you can get there.
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