This Is How You Can Buy Real Estate With Little or No Money - Robert Kiyosaki

[Music] rich dad said real estate is wealth those that control the real estate control the world rich dad would break out the monopoly board game and we'd play monopoly so for months we're just playing monopoly having a good time and finally i started to see it i said four greenhouses one red hotel when i was 19 i came home from school in new york and rich dad owned the big red hotel right on waikiki beach he had gone from poor man to a very rich man in hawaii in 10 years that hotel just sold last year he paid 1.2 million for it it was a lot of money back in 1968. he just sold it for 800 million dollars you see the beauty about real estate is you learn to use debt to get rich i'll give you another tip if you're going to be rich you have to learn to use debt it's called other people's money so when i hear poor people say to me i don't have any money i said because you're an idiot that's why you're not supposed to use your money you're supposed to use other people's money well that's it i don't want to do that and so they stay poor there's four types of people in business in the world anywhere spain us china japan there are employees employees have a mindset employees all over the world say the same thing in their head i want a safe secure job with a paycheck and benefits and a pension they all say the same things japanese espanol american filipino and this is small entrepreneur small business or a specialist like a doctor lawyer attorney real estate agent massage therapist web designer s means small self-employed these people violate rich dad's lesson number one they work for money these are the people that pay the taxes that's why you don't work for money these people don't pay taxes in your country and my country is the same and these people are big business so this would be like i own a clothing store in downtown barcelona or madrid this is zara different mindset this is a person with a small restaurant this is mcdonald's this is a small person with a coffee shop this is starbucks i don't work for our money i don't have a paycheck that's why i'm rich i don't want a paycheck i don't need a paycheck if you can not need a paycheck you have a better chance of getting rich become an entrepreneur the people who are the biggest winners are people who know how to use debt to get rich debt is money after 1971 when nixon took the dollar off the gold standard money became debt and so the people who are losers are savers so as kenny says you put your money in the bank as a saver kenny goes in and borrows it out as a debtor and we use that money to buy millions of dollars worth of real estate so kenny just went over a billion dollars worth of real estate using debt and my first property was eighteen thousand dollars but i took a three-day real estate course it was a very good real estate course about how to use no money to buy real estate the property was a little condominium one bedroom one bath eighteen thousand dollars u.s it was on the beach of maui the reason the price was so low is the market had crashed smart investors always wait for the crash so this thing crashed i had to look at 100 properties once i left the class three-day class i had to look at 100 properties in 90 days so with this here the instructor said i had to borrow buy the investment for zero money okay zero money most people will tell you i can't invest because i don't have money that's a loser this was 1974. the dollar had just gone off the gold standard everything was coming up fast so i had to figure out how to buy it for zero and the reason i say that is most poor people always says i can't afford it i know some of you right now saying well i can't afford it i don't have time i have children i have a job i have bills to pay and it is those excuses that keep you poor if you do not change that talk in your head you will always be the poor person so there was about 32 in my class three days long i think only three people completed the exercise we went we looked at a hundred properties wrote a one-page report at the end of the 90 days in 100 properties this was the best property so i went back to the person and it was in bankruptcy it was right on the beach just as pretty as this beach here and he said i had to have two thousand dollars down this is called equity again it's the language of money so i have equity the bank was going to lend me 6000 in debt that was the deal now i had the 2000 in cash but the name of the game or the exercise was can i buy it for zero so what i did was i paid for this property [Music] with a credit card so now it was [Music] 100 debt with that 100 percent debt i made [Music] 25 000 a month [Music] i was a free human being i never needed money again if you can make money with no money that is called [Music] an infinite return because i have no money in the deal the six words that are basics of financial education financial intelligence income expense asset liability and the two other words are cash flow so when you look at the average person they have a job money comes in here they pay for their house and the money goes to a bank through a mortgage so it's not an asset because the cash is flying flowing out so it's a liability so the definition of liability does it take money from your pocket and for an asset does it put money in your pocket so when i have a rental property here it puts money in my pocket so if i live in a house it's a liability because even i have no debt on it i still have taxes depreciation repairs and upkeep insurance and all this when i rent a property i've done a good job buying it and structuring it every month it sends me money so i started off when i was 25 i had a little one-bedroom condo and it put 25 bucks in my pocket it was a start so this was good debt you say this the debt also went out and paid but it also put twenty five dollars in my pocket so net net i was making money from my little house so today my wife and i own six thousand five hundred of them and every month six thousand five hundred houses put money in my pocket my my people who live in them love me and all this because they have a place to live but all of this comes from debt so we don't oh we have a hundred percent finance here it's all debt so this is good debt and what makes a good debt is are the two most important words cash flow noi means net operating income so if you really think about it it's just income minus expenses that's all it is and so it's important to know where you are financially so a banker is going to look at your income after expenses so that's a great way to see it yeah it's really it's really quite simple so let's say you keep the numbers simple you have a thousand dollars income and you have 500 and expensive this is a prop yep so you have a 500 noi or net operating income so why is that important well the banker looks at that number because that's the number that they see to be able to pay back any debt you might want right this is where this comes in right correct so so they're going to look here and they're going to say okay this person has 500 in noi therefore we can give them a loan say up to say 350 dollars 250 or something like that so they're not going to give you a loan for the whole amount because um they don't want you know that you to be that tight so but what they're going to do is they're going to look at the noi and say how much can we loan you so when kenny calls me says i have this property it's in horrible condition there's no income there's expenses all over the place you get excited right a lot of people get hung up here because they don't have a financial statement any way to go to a banker let's say but sometimes a banker will look at the property itself so they'll say this has a bad noi on it why would we give you money you know what i mean and then so that's when the financial education comes in and you say well this is what i plan to do with it correct what kenny is saying we've had i'm keeping the numbers simple he's had income of zero yeah and this is a thousandth yeah so you'd have a negative and a y and the banker goes tell me why i can't lend on that right because there's there's it's a higher risk of being able to be paid back the noi or the net operating income determines the value so you what you back into it they another vehicle called the capitalization rate or cap rate so it's actually we're getting a little technical but typically the cap rate or capitalization rate uh divided into the noi determines the price so that's generally how that works but in the case that we were talking about the the value of the building with no tenant in it is way low it's way low and there's really no income so uh it's basically whatever you know the structure is so i've seen lots of situations where a vacant building somebody might have spent five ten million dollars on a building that's completely vacant you know vacant warehouses vacant whatever's right sometimes you see them get converted into clubs or whatever well there's value there somebody spent a lot of money on it well one time somebody owns it too it could be a bank it could be whatever so taking that and creating value sticking a restaurant in it a gym in it a club in it it doesn't really matter who's in it what does because you want them to pay you but but you know now you're creating the income and then that's how you create value so in that example let's say let's say you buy a building for a million bucks you know on a block um with a tenant in it it could be worth three four five million so what if it's if it's a tenant in it the value is uh yeah right because now then what you do is you put all that together and then you can actually sell it got it and so even if the noi is negative if you create a plan that creates value for the property and shows the increase that you're going to give the property's value the bank will give you the loan oftentimes yeah and yeah not always but there are there are ways to do it so in that particular case you might get a loan from somebody like robert and say hey you know i need a million bucks and this is my plan and then once you get a tenant in it then you go back to the bank and you say hey give me a loan and and then they give you a loan and you pay robert back so the thing that kenny is always looking for is after we stabilize the building he'll tell me it says look in five years i'm gonna get this from 1 000 to 10 000. yeah i'll go okay so that i know i'm in it for five years with them as an investor and on top of that we're going to reduce the expenses back to 500. the noi goes up the value goes up the debt goes up to let's say 10 000. so i have a friend for example he actually bought a building uh in um a town up in idaho where i have a vacation house for about a million bucks and it was sitting it was an old elks building beautiful building downtown but it had been vacant for a long time he bought it and he put like 30 offices in there small offices you know 1500 to 2000 feet each and grew the the revenue right so everybody pays so they so the income went up yeah you know what i mean so he broke it up and and and then leased it up and his you know so he has his expenses but now he's got 30 people paying rent as opposed to just you know one big vacant building he turned it into a pretty cool workspace you know for everybody but the what and then kenny's in his third book you know the advanced guide to real estate his job is to get this up keep this stable then he goes back to the bankruptcy's look we've got all these tenants monies going up and so we now want 12 000 yeah because he's improved income kept expenses low buildings more valuable yeah the key there is the the bank's always looking at your noi to pay back their loan so the the more you can grow that the more loan you can get and so essentially the renters are paying your debt of course okay yeah essentially so if that building i was referring to goes to 50 vacant now he's in trouble but if you can keep it full so now you're getting into management but regardless of that that's how you do it you there's opportunities like this everywhere and i know another thing that you always mention in all your books in the abcs of real estate investing is that property management is very important poor property management equals poor profits right and so i wanted you to kind of explain the importance of the property management well essentially all property management is is taking care of the property in every way so taking care of the people that might be inside of this building you know for the various things that come up from day to day collecting the rent and paying all the expenses that's really all it is and so the property manager's job is to make sure the place is clean and and that things are getting rented and all those things and so the owner of the building would hire a company like that or they can do it themselves and um and basically uh keep the place full so in our world you know we have a property management company that we have about 300 employees all we do is focus on this these these two things how do we keep our expenses low and keep our our income high because we're always trying to grow our noise so our noi you know we have a budget for let's say 2017 or 2018 or 2019 the goal is to grow that noi each year and kenny's done such things as the way he grew the income he put washing machines right yeah in the united states and so when he put washing machines in the building this one up right yeah so uh in my apartment houses um we would buy apartment houses that had washer and dryer hookups but no machines and so the people would walk down to the laundromat or whatever and it was a bit of an inconvenience for the people and all that so i said well let's just buy for 650 dollars we can buy a washer and dryer set and stick them in all there and we did that and so i probably bought uh three or four thousand sets of washers and dryers for a lot of our properties and so now all of a sudden we can charge 75 or 100 more in rent and this goes up yeah this doesn't go up as much it's a win-win because they have to go spend some money anyway to go do their laundry now they can do it here and for me if i can pay back those washers and dryers in one year because it's only 650 for a set and if i can get 75 dollars more then all of a sudden i've got 900 to almost a thousand dollars more in rent so i'm actually it's a it's what i call a one-year payback on so kenny does he borrows the money here yeah to put washing machines in here again the tenant pays it all off and the washing machine stays right yeah and i think that's a brilliant idea because i know that both of you have created incentives for the renters so for example if they stayed for a year you would do certain renovations like including the washing machine and so every year there was another incentive which not only increased the property's value but also the renters paying for it essentially and the banker was happy yeah what would you guys respond to the critics who say that real estate is a slow lane approach to getting rich that's fine with me i i can't think of another i mean i think i think it's really super simple wow real estate is very slow and very dumb every month we got cash flow yeah you know it's i like that i like you know we're not banking on something going up we're cr this is called creating value we're not parking our money in something and hoping it goes up that this is very strategic perfect so everybody's got their point of view most people want to get rich quick that's why they never get rich yeah this is not bad yeah this this is financial education this is smart this is having your banker be your partner yeah and these are long-term assets by the way these are these are this is like this is a business this is like managing a business we would not sell these so unlike the stock market or something you know we're not trying to time things we're trying to generate cash flow here and then move to the next one okay so can i give you one last thing because those guys always upset me so what kenny does he increases this fixes this and then when this goes up he gives my money back so i might give kenny a million dollars for five years let's say he increases this decreases this the bank says oh yeah noi is up so he puts all this money in there i get my million dollars back i still own the property i still have the cash flow going in so all you guys want to get rich quick it's called an infinite return right yeah and it's tax-free tax-free the reason it's tax-free is because when we use debt to pay back debt it's debt so it's owed so when robert gets his money back it's actually tax-free yeah let me say lynn kenney this is pretty common numbers a lend of 1 million he fixes all this the bank gives him 3 million i get my million dollars back right and that is tax free i get it back right and i still own the building with kenny so yeah so to your question you know you got to wonder why if you can invest a million dollars and get it back tax-free and still have lots of cash flow and still have the cash flowing this why somebody would think that you know it's a pretty simple [Music] i

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Id: lXcnJmBGAeU

Length: 22min 18sec (1338 seconds)

Published: Mon Mar 29 2021