Do you want to buy an apartment, but your income doesn't allow you to? No need to worry; the way out is already here. By watching this video, you will learn about Robert Kiyosaki's plan, which will help you not only buy a cherished home but also invest profitably, providing yourself with passive income.
Welcome to the main channel on finance! Subscribe right now if you want to find out about all the money secrets. [Music] So, what is Kiyosaki's approach to investing in real estate based on his experience?
Robert recommends buying real estate with borrowed money from the bank and renting it out at a price that will cover monthly loan repayments and additional real estate expenses. By creating this kind of cash flow, you will come to the point where your real estate will pay for itself. Investing in real estate provides four returns at once: rental income, depreciation, appreciation, and tax advantages, writes Kiyosaki in his book, *The Real Book of Real Estate*.
This approach is quite risky because, in an unstable economic situation in the world, it is difficult to make calculations for the future. So, there may be such a situation that it will be difficult to pay back the money you borrowed from the bank at interest. But if you assess all the risks correctly and approach the Kiyosaki plan wisely, you are likely to succeed and become richer.
So, let's break down the basic principles of Robert Kiyosaki's method, and then look at specific examples. Robert Kiyosaki started investing in real estate with an initial capital of $300. Today, he was able to earn over $100 million in real estate.
You may ask, what is the secret to such success? He was the person who managed to invent and implement a formula that allows you to make money on real estate investing with the minimum amount of your own funds. You can buy an apartment today in several ways: on credit, by installments, with a mortgage, with borrowed funds from a bank, and for 100% payment.
According to the method of Kiyosaki, the most correct way would be to buy residential or commercial real estate on credit for its full value. Thus, you have the opportunity to buy an apartment from a developer as if for free and to have income from this kind of investment indefinitely. Currently, there is a real way out of this situation: some financial institutions provide mortgages if you have absolutely no money at the time of signing the contract.
Thus, you can implement the Kiyosaki method. It is only worth noting that the annual interest from such a deal is rather high. So, an example of the scheme itself: figures are conditional.
- The object's price: $140,000 - Registration cost: $10,000 - Initial payment: $40,000 - Costs: C = $10,000 + $40,000 = $50,000 - Loan (L) = $140,000 - $40,000 = $100,000 - Loan term (LT): 100 months - Loan rate (LR): 1% per month Loan payments body (B) equals $100,000 / 100 = $1,000 a month. Interest (I) equals loan times loan rate, which is $100,000 times 1% = $1,000 a month. Loan free equals loan body plus interest, equals $1,000 + $1,000 = $2,000 a month.
Taxes, utilities, and other expenses equals $500. Rental income (R) equals $3,000. Net income (N) equals income minus loan payments minus utilities equals $3,000 - $2,000 - $500, which equals $500.
So, we get the following: by spending $50,000, we have purchased a property worth $140,000, plus a source of constant income of $500 a month. In this case, that's 1% per month. It seems small because without the $2,000 a month credit payments, we would have received five times that.
But no, not five times because the $2,500 a month income would have had to be divided by the full $150,000 in expenses, and that would have been about 1. 7% per month. But we just didn't have that amount, and even if we did, we would have been better off buying three similar properties on credit and getting a combined 3% per month versus 1.
7% per month. It's not easy to get a ratio like this, but it's possible. The main thing is to put aside some empty and trash offers which are on the market and take, perhaps, a one-of-a-kind gem among them.
It is unlikely to be in the residential real estate sector; first and foremost, we should consider office, retail, and warehouse space. There are many factors that influence our choice, and since they are not the main topic of this video, we will not talk too much about it. Obviously, the final income could be improved by reducing the price of the property, the cost of registration, the loan rates, the size of the down payment, taxes, and utilities, as well as by increasing the term of the loan and the cost of rent.
Each of these parameters can be improved, modified, and put in the right direction. This too is a separate and quite a big topic. When the loan ends, we will be able to get $2,500 a month, but our costs remain at $50,000 because all the rest has been paid.
Our rent income will be 5% per month, which is really five times more than during the loan. But the most interesting thing comes next: let's say 50 of our 100 months have passed. $50,000 of the required $100,000 have already been paid off.
Let’s say the market value of our property has not changed. We come to our bank with an offer. We have a property worth $140,000 that generates $2,500 net income each month, and for which we owe you $50,000.
They can see that you are a good borrower, able to meet your loan obligations, and your income level allows you to do that. So why not refinance our property to its full value? They will give us a loan of $140,000, of which we will pay off our debt of $50,000 and use the remaining money to renovate the property, which will increase rent payments to $4,000 a month net, and for a down payment to buy a new rental property for which we will again take a loan from the bank.
Given your impeccable credit history, you can ask to reduce the rate of the new loan and increase its term; the rate banks dream about such borrowers and, within reasonable limits, agree to meet them. However, the situation in the credit sector is tense. Borrowers do not trust the banks, and the banks do not trust the borrowers; each side is cheating and looking for one-sided benefits.
In such conditions, it is harder to gain a good reputation, but harder does not mean impossible. That's why you need to prepare for the Kiyosaki team well in advance. What does this mean?
Have a positive credit history, learn to evaluate and select properties, learn to make and calculate business plans for the rental business, learn the principles of banking for different types of lending, and know the rental situation in the real estate sector. As you have already realized, it is quite possible to buy an apartment and earn some good money. The main thing is not to be afraid to take small risks for a large profit, because real estate is one of the assets that determine our wealth in the long term, and we should treat it accordingly.
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