Robert Kiyosaki’s Rich Dad Poor Dad is a popular book, and it has a little something for everyone, but one thing is certain; its core messages resonate with real estate investors the most.
To give a general preface for those who haven’t read it yet, the book sets the main argument of what rich dads teach their kids versus what “poor” dads teach their kids. He’s speaking from experience, as he was raised by a father who he deemed poor, while the rich dad he’s talking about is his best friend’s father, who he was close with.
One of the book’s key messages is that the two teachings are complete opposites. According to the writer, making decisions in life that may seem risky when viewed by someone with a scarcity complex is actually how you can break the cycle of living day by day and start generating money out of money.
Sure, the plot seems interesting, but what about this book inspires real estate investors specifically?
Well, Kiyosaki puts a strong emphasis on the importance of having assets instead of liabilities, and a good way to generate assets is by investing in real estate. The book also strongly encourages people to own their own businesses, so it’s really no surprise that it serves as a motivation tool for many real estate investors.
Throughout the book, Kiyosaki lays down his thoughts in the form of six teachings, or principles, and he gives advice that has significant relevance to the real estate investment business. This is why we’ll go through all of the main ideas in these teachings, and see what we can take away from each of them in the context of real estate investment.
The principle is simple; the rich don’t work for money, they have money work for them.
According to Kiyosaki, this principle is based on the idea that people are either driven by greed or fear, and some people might be driven by a combination of the two. To be able to take risks and make business moves, the book theorizes that we need to learn to control these feelings.
Without the fear of losing money, or the greed of staying at an unsatisfying job because a stable income is so convenient, we can focus on jobs that will generate passive incomes. According to the book, passive incomes are how rich people have money work for them. The idea is to buy assets instead of liabilities, which can be in the form of real estate investments, and this is where greed comes in.
To create and grow a business, Kiyosaki suggests that we have to learn to spend money and fight the feeling of greed that makes us want to spend our money on luxuries, like a new phone or a car.
For real estate investors, this messaging is very relevant, as real estate investment is one of the soundest ways you can generate a passive income. It’s also encouraging in that it inspires investors to hold on to whatever they make, and put that money into their business and their investments. Kiyosaki believes that this is the only mindset that can get you on track to build an empire of your own.
In this chapter, Kiyosaki talks about the importance of tax law and business law, and how knowing how to use them well can save you more money and effort than you think.
We have talked about this in one of our blog posts before, but knowing tax laws well and utilizing them to your advantage can actually save you a pretty penny in the long run.
As you know, the real estate business, by nature, is also heavily involved with tax law. Properties are normally tied to a variety of taxes, which can either become a liability or an advantage, depending on how well your ability to manage your taxes is. Moreover, as you manage a business, knowing the ins and outs of the laws that are related to managing your business is key to avoiding fines, or even going to prison.
This is why Kiyosaki states that learning about the laws carries great importance for learning how to acquire and manage assets, which is a rule real estate investors should always follow if they wish to run a business that generates stable revenue from properties.
Another key messaging of this chapter is looking at your earnings through the filter of taxation. Kiyosaki argues that many people invest in properties without sufficient knowledge of tax laws. Because of this, they calculate their earnings without taking taxes into account, whereas the so-called “rich” people always deduct all the potential taxes and expenses, and take what’s left into account.
Adopting such a point of view is always an effective way to look at one’s finances. After all, this statement rings true for everyone who wants to run a successful business.
This chapter might as well be called the meat and bones of the book, as it strongly emphasizes the importance of owning your own business, which is what the whole idea of the book is really based upon. Kiyosaki firmly believes that everyone should own their own businesses, and that working in a salaried job is a guaranteed way to stay stuck right where you are.
As the previous chapter lays the foundation, this chapter builds upon the idea of not buying liabilities and only buying assets, and expands it by saying that personal assets or a house to live in that’s bought on a mortgage are not considered assets in this sense.
The book in this chapter mainly suggests that investors should keep their costs down, keep working their currently income-generating jobs, and focus on pouring this income into buying assets that will generate passive incomes or new investment possibilities.
There’s a lot to take away from this chapter, as Kiyosaki delves into the benefits of corporations, and how utilizing them can save investors a lot of money and time. There’s also a strong emphasis on tax laws here, which builds upon the ideas that were established in the financial literacy chapter.
Basically, Kiyosaki lays down what corporations are capable of, and that they have much more “wiggle room”, so to speak, than private individuals in a business context.
Additionally, the writer gives great insight into how investors can build a strong financial intelligence in this chapter. He theorizes that a good knowledge of accounting is key, and that investors should be good with numbers. Moreover, investing and learning to spend money on investments is another practice that should be adopted in this endeavor.
In addition to these, Kiyosaki also states that a good comprehension of how markets work and knowing the laws related to the business are other factors in building a robust financial intelligence.
This is where the importance of corporations becomes apparent. The chapter is urging investors to manage their businesses through a corporation, and the way to do this effectively is by doing your due diligence on corporate law.
This chapter puts a strong emphasis on the importance of financial intelligence. Kiyosaki defines financial intelligence as not being afraid of change and taking risks in order to have bigger gains. He states that real estate investment is a field that allows for greater risk-taking, and that it’s an effective way to create a passive income.
The reasoning behind the idea is that the rich are able to make financial decisions that carry greater risks, and their gains are in direct proportion to that. This is because they lack the fear that hinders the so-called “poor” people from being successful.
Another idea that’s valuable for investors is regarding Kiyosaki’s definition of an ideal investor. He suggests that an ideal investor is a creative one. This type of investor is able to view separate opportunities in relation to each other and connects these opportunities in a way that can benefit them.
According to Kiyosaki, a good way to have such an outlook on opportunities is through working with the right people with the right mindset, and being on the lookout for openings in life that other people may have overlooked.
One of the key ideas we can take away from this chapter is that your time is gold, which should only be spent on learning. The previous chapters already establish that you should utilize your time to learn instead of trying to make money, and if you’re unable to do so yet, you should find ways to build a strong asset base that will generate passive income.
This idea is then explored deeper, and the writer suggests that building businesses that don’t require your presence too much are another way to achieve this. A good way for investors to do this is by investing in tools that can automate some of their daily tasks and processes, so in a sense have money work for them, which recalls back to the first teaching explained in the book.
Investors can automate many processes by using digital services and tools nowadays. For example, in one of our previous posts we talked about how a process like marketing that is important and time-consuming can be automated. Automating such processes saves you time to work on your continuous learning and your asset building.
As you see, real estate investors have a lot to take away from Kiyosaki’s Rich Dad Poor Dad. We tried to sum up each main idea explored in the book through the lens of investment, but there’s a lot more to learn in there. If you haven’t read it yet, it’s definitely a good investment of your time.
It’s an inspiring book where Kiyosaki gives a lot of advice about managing a business, building an income-generating asset base, and it encourages readers to learn about business, corporate laws, and to start their own businesses. This is why it’s a good book for everyone, but its core messaging makes it a great book for real estate investors.
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