Excuses of the Poor

Real Estate Investing Success

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Excuse No. 1: No Education

Most people are smart enough to invest in real estate. Investing in real estate is not that tough. Anyone who has bought a home or rented a place to live has invested in real estate. So investing in real estate is not tough. Making money in real estate is another matter. Making money in real estate takes real, real estate education.

When I speak of making money in real estate, I am speaking of cash flow. Cash flow is income coming in every month, regardless of whether I work or not. I am not talking about capital gains. When people say their house has appreciated in value, or they flipped a property—buying low, fixing it up, and selling it—they are speaking of capital gains. There is a tremendous difference between cash flow and capital gains. In my opinion, capital gains are easier to achieve than cash flow. Achieving sustainable cash flow requires a higher degree of financial education. The good news is you do not have to go to college for four years to get this education. A three-day seminar is sufficient, if it is a good seminar. The Rich Dad Company offers beginning and advanced courses in real estate investing.

In 1997, when Rich Dad Poor Dad was published, I wrote about the difference between assets and liabilities. My rich dad's definitions were simple: assets put money in your pocket and liabilities take money from your pocket. In the book I stated, "Your house is not an asset. It is a liability." In other words, for most people, their biggest real estate investment, their house, cash flows out, not in. I received hate mail for years because of this one point. After the subprime mess, massive foreclosures, and declining home values, millions of people now realize that real estate can be either an asset or liability.

For most people, their home is a liability, even if the mortgage is paid off. Most homes are liabilities because most homes do not produce any income. Most homes cost money: for insurance, property tax, repairs, and other expenses. If a person sells his or her home and the sale puts money in that person's pocket, at that moment the home is an asset. Until then, it is a liability.

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