Robert Kiyosaki: How To Get (and Leverage) Other People’s Money To Build Wealth
Written by
Laura Beck
Edited by
Cory Dudak
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Robert Kiyosaki is the outspoken personal finance icon famous for “Rich Dad Poor Dad,” the hugely successful personal finance book. What vaulted Kiyosaki to guru status was his contrarian philosophy around money and wealth building — concepts deeply at odds with conventional wisdom. Central among them is masterful utilization of “OPM” (other people’s money), to turbocharge investing and achieve financial freedom.
As Kiyosaki explains it on his website, using OPM is one of the key strategies the rich use to accelerate wealth building. Basically, it means investing funds from external sources rather than your own savings. This greatly increases your leverage, allowing control over more and larger assets.
For example, $10,000 of your own money may only buy $10,000 in stocks. But using that as a down payment on a rental property worth $100,000 gives you control of a much more valuable asset that’s generating significantly higher income.
On Kiyosaki’s website, he and his team outline the process of building an investing empire largely on borrowed capital. “By understanding how to make money using other people’s money,” he wrote, “you can make the leap from employee to business owner or professional investor.” Here’s how.
Angel Investors and Venture Capitalists
This high-powered “financial rocket fuel” provides huge investing leverage. Angel investors are typically successful entrepreneurs willing to fund startups or projects they believe in. Venture capital firms are professional investing companies that raise pools of capital from institutions and wealthy individuals to deploy in early stage businesses. Either can quickly scale up your holdings.
Traditional Financing
Familiar options like mortgages, home equity loans and auto financing are common leverage vehicles. Borrowing at good interest rates allows controlling more expensive properties with a smaller down payment. Increased cashflow from rents or business ventures helps pay down the debt and generates residual income. Win-win!
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Conventional Bank Loans
Two things to know about conventional bank loans: Secured loans require hard assets like property or vehicles as collateral while unsecured loans rely solely on creditworthiness. Strategically utilizing both is the key — it enables you to have productive assets and stay rightside-up on payments.
Credit Cards
Surprisingly, credit cards can helpif used correctly by helping fund down payments on profit-producing purchases. The key is proper allocation into cash-generating assets which, in turn, provides income to pay off balances.
Alternative Financing Solutions
Also termed “creative financing,” strategies like seller financing, lease options and wrap mortgages are great OPM tools familiar to the wealthy. Business or property sellers carry financing at favorable terms.
Peer-to-Peer Lending Networks
Online platforms like LendingClub, Prosper, Upstart and Funding Circle connect investors directly with creditworthy individual and small business borrowers. Investors enjoy consistent monthly cashflow from loan repayment principal and interest.
How it works is simple: Defaults are minimized because of broad diversification across many loans. Sites like LendingClub offer consumer loans while Funding Circle focuses on small business lending. By utilizing technology, these P2P networks provide investors easy access to notes and interest yields not typically available to individual investors.
Private Money Loans
Again, how this works is simple: Hard money lenders provide capital strictly for investment purposes backed by asset collateral. Unlike banks, private lenders may accept other risks. Both offer extensive financial leverage.
In Kiyosaki’s philosophy, mastering OPM by implementing even a couple of these high-powered funding sources positions you to build out an extensive asset portfolio capable of building a winning financial future. After all, according to Kiyosaki, you’re only doing what the rich have done all along: Using other people’s wallets to build your own fortune, one investment at a time.
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