Robert Kiyosaki, the best selling author of “Rich Dad Poor Dad” is all for cash flow.
He’s teaching us in his book that don’t depend on your job, government or retirement plan to bail you out after retirement. Instead, everyone should start your own business and start investing in real estate for cash flow and not capital gain.
His strategy for investing in real estate is to:
1. Buy a property in a good location that’s close to many jobs.
2. Financing – borrow money from the bank or private investors or both for the amount of the purchase plus improvement costs. You can still put 20% down but it would be from an investor making the deal “nothing down.”
3. Improvements – increase the value of the property by making improvements such as adding a bedroom and a bathroom.
4. Increase rent – since the property has been improved, you can get more rent for the property.
5. Refinance at the new appraised value to pull your money out and re-invest.
6. The cost of the mortgage interest and other expenses such as property tax, insurance, etc should be covered by the rent so the property cash flow.
The important points to his investment strategies are:
– Improvements to the property
– Good location with jobs nearby
– Good financing or investor
– Good property management (Choose your tenants carefully and hire professional property management!)
Once you found a great property, bought it and improved on it, you think your job is done. But from my experience, the hardest thing to do is to find a good property management company.
Now the property is vacant, you want to find a tenant as quickly as possible. But remember, getting rid of a bad tenant costs lots of time and money. It is much easier to just wait for the right tenant. Property management company is also very important. They are dealing with your money and your assets. It is best to find one from referral where other people had good experiences with the company and interview them yourself. Ask lots of questions. I can write a book about property manager nightmares from the first company I hired. It sure is an eye opening learning experience.