This book is called The Real Book of Real Estate because the people I chose to be a part of it are real-life real estate investors. They are not people who just teach real estate and make their money teaching. Wayne like the others who I asked to be part of this book, makes his money doing what he teaches. He is one of the best real estate investors and one of the best finance guys I know. He is, like all of the advisors in this book, doing his own deals while teaching others how to be rich using the same methods and formulas he uses himself. I am always leery of people who give advice and say, "Trust me." Then they don't do what they are telling me to do. Those are not the kind of teachers I want around me. And they are not the kind of teachers who are in this book. This book is real people and reallife real estate strategies that they use to build wealth.
One of the things I like most about Wayne is how his brain goes into overdrive whenever he sees a roadblock in the way of his or one of his client's goals. When it comes to finance, nothing stops Wayne's creative mind. Obstacles become excuses for Wayne to find innovative ways to get around them.
Wayne is an excellent teacher, and he has taught me more through example and through the deals we do together than even he probably knows. He can take things that are very complex and make them simple so that I can understand them. When I first met Wayne, I could tell from the way he talked and the way he carried himself that he spoke from years of experience, successes, and failures. Life is the best teacher, and that's why Wayne's chapters and the others in this book are so powerful. They are full of stories and experiences that are entertaining and educational. Education should be fun. If it isn't, I'm not interested. Wayne is a great communicator. He has a way of telling a story and teaching a lesson that keeps you wanting more. Read this chapter, and you'll see what I mean.
On the bookshelf opposite the desk in my office sits an antique jar filled with marbles. It is there to remind me of the importance of capital. As a fourth grader, I didn't call it capital, and I surely didn't realize the role that capital plays in business. I just knew I wanted to play marbles with the other kids, and I couldn't get in the game unless I owned some marbles, or at least one marble.
Coming from a family of modest means, it was out of the question to ask for money for marbles. I accepted that I should expect only a few new toys on my birthday and on Christmas. If I didn't take care of the toys I received twice a year, I would go without or make my own. I made trucks out of scrap lumber, bows and arrows out of whittled sticks, and forts out of haystacks, but I could think of no way to make a marble. Every day I watched with envy as other boys, and a few bold girls, played with those flashing glass spheres on the playground. I studied their techniques and strategies. I ached to get in the game. I had a plan as to how I would approach the game if I could find a way to play, but I was locked out. I had no "taw."
Where I come from, a taw is that one precious marble that each player selects in order to play with the greatest skill. It is the perfect weight. It fits the thumb just so. It is the single marble out of the entire bag that the player feels will give him or her the greatest advantage in a particular game. I knew if I could just find a taw, I could get in the game.
"FIND A TAW!" That was it! I suddenly remembered playing along the side of our home as a five-year-old. While digging in the dirt to build roads for my toy cars, I had unearthed a white marble. Having no value to me at the time, I left it lying in my diggings where I had found it. I wondered if it was still there. I rushed to the barn and grabbed a shovel. I turned up the dirt and carefully chopped through the overturned earth to loosen it. I got down on my hands and knees and sifted through the soil with a spoon. After a few minutes of mining, I felt and heard a click on the end of the spoon. My heart jumped into my throat. I felt a burst of excitement tingling in my temples. I brushed back the soil, and there it was—a somewhat dirty, but perfectly formed, ivory-colored marble.
Something shifted within me at that moment. I felt a rush of freedom and opportunity. I was wild with excitement that I could finally get in the game on the playground. It was as if I had come of age or had been declared worthy to be a real boy. The doors to my future opened wide. I was prepared to be a marble master, or so I thought. Owning my own taw became a right of passage for me.
Suddenly, my jubilation was cut short by a flood of fears that crowded my thoughts. In every game of marbles, like battles in a war, someone wins and someone loses. What if I lose my only marble? Where will I find another one? Who am I to think I could win when the other kids have been playing for months or years? What if I get totally embarrassed? What if I start crying right there in front of the toughest guys and the bravest girls? What will they say about me? What if they make fun of me? I was petrified.
As I clutched the marble in my hand, I realized how critical it was to my game and yet knew I couldn't play without risking it. Finally, I decided that if I must take the chance, I would take the smallest risk possible. I would challenge someone of the lowest skill level. Because I had been watching others play marbles for months, I knew who the champions were and who to avoid. Even if they called me out and teased me for being too chicken to play them, I would refuse to risk my taw on a game I couldn't win. I would play to win by carefully choosing the first games I entered and the opponents I faced.
I took my chances and got in the game. By the end of fourth grade, my shooting skills had improved considerably. I dared to play anyone in the school under the right conditions, and I had a gallon can full of marbles as proof of my progress. They were treasure to me. Each one held a memory, and each had a story of how it had been won. I kept my original white taw safely in a smaller pouch to remind me of how far I had come. It was no longer my best marble for play, but would always be my favorite, for sentimental reasons.
Sometimes when I teach seminars, I ask which of the attendees consider themselves to be capitalists. Almost every hand in the room goes up. Then I ask how many have capital. Most of the hands go down. To play in the game of cap italism, one must own or control some capital. Like marbles, capital is the "taw" that allows us to play the game. Raising capital is a vital skill for anyone who wants to get out of the rat race, as taught by the Rich Dad CASHFLOW game.
TIP Louis Kelso, the father of the Employee Stock Option Plan in the United States said, "The right to life implies the right to earn a good income. When 90 percent of the goods and services are produced by capital workers-people who own capital—as it is in an industrial society like ours, you can't earn a good income without owning capital."
(BILL MOYERS, A WORLD OF IDEAS [NY: DOUBLEDAY, 1990])
Investment Bankers Corporations
Mutual Funds figure 7.1
Robert Kiyosaki expressed the same principle in one of the Rich Dad business schools, showing the hierarchy of the economic food chain:
You may notice that those who work for money are on the bottom of the food chain. They get only crumbs, after everyone else has taken the best returns. Also notice that the capitalists are at the top of the food chain. Everyone works for the capitalists. Capitalists fund all enterprises. The capitalists own and control the majority of the wealth. The biggest returns, the best leverage, and the greatest tax advantages go to the capitalists. The capitalists are also those who take the biggest risks. Still, given a choice, why would anyone want to remain an employee, rather than becoming a capitalist?
Working for money is an arduous way to move up the economic food chain. If you continue to work only for money you will never escape the trap of the rat race. What is the key to economic freedom? It is the ownership or control of capital. If you want to be a capitalist instead of an employee, capital is the key. Capital is your taw. It empowers you to leverage and move ahead faster.
So how does someone who has no capital get started? Where do you go to get your first marble?
There are three basic ways:
1. Save it from your earnings
2.Borrow it from someone else
3.Trade ownership (equity) for capital
Let's look at each of these methods in more detail.
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