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Turn Good Debt Into Assets!

Aug 17, 2007
After reading a number of books, I realized that most people made their wealth through real estate. This is also highlighted by the Rich Dad's series by Robert Kiyosaki. Thus, I decided to learn more about property investment. Even though I did not have money to invest in property, I still went ahead to attend property investment seminars for the purpose of learn.

Based on my understanding, there are two kinds of property investment seminars. The first kind of seminar teaches me how to go about doing property investment. It provides education on the criteria to look out for in property investment. This is good for me have a basic theoretical foundation of property investment.

For example, I should check out whether the population is growing in a city before I decide to invest in a property in that city. If the population is growing, then there will be demand for housing. If there is demand, then there will be an opportunity for my house to be rental out.

The second kind of seminar is basically a sale seminar. The property agent will try to sell me the property. If I can afford the time to attend such seminars, then I will attend them. You may think that it is a waste of time to go for a sale seminar. But I feel that I can learn a few things from the property agent.

At such seminars, there are usually quite a few property agents. If I talk to them, I will find that one or two of them are very experienced in property investment. Usually, they have invested in some properties as well. If I ask the right questions, I find that I can learn practical tips on property investment. These tips are not available in textbook or theoretical education in the first kind of seminars.

By mixing with the right kind of people, I get to learn new things about investment. This confirm my understanding that it is important to mix with the right kind of people to learn about wealth investment as gathered from the Rich Dad's series by Robert Kiyosaki.

Just to give you an idea of what can be learned from such experienced property agents, let me share with the formula that I learned.

Imagine that I was the owner of a property that is worth $1,000,000. This property was fully paid off. I could not rent out my property for a few years. Rich people could afford their own property, thus they would not rent such an expensive property from me. Other people would not be able to afford the monthly rental. So I thought the best was to sell off my property and used my cash for some other investments.

After learning from these experienced property agents, I found that there was a better solution. I could mortgage my property for $1,000,000 and use the borrowed money to invest in small properties of about $200,000 each. That means I could buy about five such small properties in an area where the rental incomes are good.

The important thing was that the combined rental incomes from such properties must be more than the monthly mortgage repayment. Let assume each of such properties had a rental income of $1000 per month. That would mean in a year, the properties would fetch $60,000 in rental income. After paying off the mortgage repayment loan, I would still get a positive cash flow.

There were 3 distinct advantages in this strategy.

Firstly, I would still get to keep my $1,000,000 property. I could try to rent this out or use this for other purpose.

Secondly, I would be earning passive income from the 5 properties. I could use the extra cash to do other investments. Assets could be gained at a faster rate with this extra passive income.

Thirdly, I would own 5 new smaller properties using the bank's money.

Of course this strategy required good ground knowledge of the real world of property investment to implement. For example, I must know where to find 5 new smaller properties with combined rental income greater than the mortgage loan. This is only possible by gaining the knowledge from experienced investors.

Another thing about this strategy is that it is an example of using good debt to buy more assets. Using the same strategy, I could use the passive income to finance my purchase of luxury items. That means that I would be using good debt to finance bad debt. These are the lessons that I have learned from reading the Rich Dad's Series by Robert Kiyosaki.

The author only provides the material and information as a layperson's views about an important subject. The materials and information are from sources believed to be reliable and from his own personal experience, but he neither implies nor intends any guarantee of accuracy.

All the materials, information and procedure in this book are only the author's personal opinion. You must consult your own professional advisor and other reputable sources on any matter that concerns you or others.

The author, publishers and distributors are not competent and do not profess to give legal, accounting, medical or any other type of professional advice. The reader must always seek those services from competent professionals who can review your own particular circumstances.

The author, publisher and distributors particularly disclaim any liability, loss, or risk taken by individuals who directly or indirectly act on the information contained herein. All readers must accept full responsibility for their use of this material.
About the Author
Max Ng shares about his struggle for financial freedom at http://www.richdadsecrets4me.com
He is the author of "Your Greatest Gift! Why Waste It?" at http://www.yourgreatestgift.com
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