Plans Change

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My husband and I are extremely gung-ho about real estate investing. We have seminars to attend all over the country, forums to go to, people to meet, properties to buy, and...well, you can imagine all the other things we really want to do right now. I will say this, real estate investing is something to really learn about and prepare for before you dive in. You can fail and fall pretty hard in this business, I see it every day while doing my research: owner needs to sell, multiple properties foreclosed on that were owned by the same company, mis-managed properties, and the list goes on.

Nick and I really want to just dive in. We have some pretty large goals and a small time frame to achieve them in, but we are eager and ready to learn. I attended a seminar recently that basically gave me the step-by-step guide on how to find, buy, and close on a property. Having taken that seminar I wanted to run out and start buying, in fact, we were encouraged to; but I knew there were still things I needed to do.

Originally I had seminars scheduled about every 2 weeks in different cities for the next 3 months. I wanted to run out, learn, and apply. Since then, I have learned another valuable lesson; you need to walk before you leap. My real estate coach has been walking me and Nick through the different things we need to do before we jump out into the market. For example: we need to set up our current finances and come up with a debt elimination plan, we need to reschedule our time so we can learn more, we need to set up our real estate team, we need to do market research, we need to go over our funding options, we need to network and get a pool of investors going, and...you get the idea. It's like our coach said, if you are going to build a house you don't just run out and start pouring the foundation, you need to do a lot of planning first.

As a result of this small lesson I changed my plans. Now I plan to attend a seminar every 4-6 weeks to allow myself time to actually apply what was learned in that seminar before moving onto the next one. This way is much more beneficial since I will retain more information once I give myself time to put it into practice. Once I've mastered many different real estate strategies I can dovetail a lot better (dovetailing is when you use more than once strategy in any given real estate deal such as: buy wholesale, get creative financing, rehab the property, then lease option it out =4 strategies).

So, Nick and I won't be running out to purchase multi-million dollar apartment buildings right away like we really want to, but we will get started on the right foot and have a sturdy foundation to build on. Once we do get everything in order, watch out world, we're going to invest like crazy!

Marketing is My Business

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It may not seem like marketing is your business when you're a real estate investor, or it may be the last thing you think of, but it's true. When you are a real estate investor, marketing IS your business. Let's look at it like this. If your business structure was an target sheet, real estate would be your bulls eye. Real estate is your goal, your core, the thing you are aiming for, but how are you going to get there? Especially if your just starting out in the business. Through marketing, of course.

Every successful company spends millions of dollars in advertising campaigns each year. Nike, Wal-Mart, Coke, McDonald's, and the list could go on. Marketing is the lifeblood of each of these companies. Without it, it's safe to say that they would most likely parish. Marketing is what informs people about what they're doing and what their deals are. Marketing is what brings the people in by the millions, and keep those companies making large sums of money.

So, why would a real estate investor need to use marketing? Simple. As a real estate investor we also need to bring people to us, whether it be buyers, sellers, renters, or other investors. We need to bring people to us, so we can help them and make money in the process. Take, for example, a simple add in a newspaper, on a sign in front of a yard, posted online that you may have seen before, "We buy houses! Cash or terms! Give us a call xxx-xxxx." It's simple, but think of it...as an investor, you no longer need to go out and look for homes to buy or motivated sellers to help out...they are going to call you! When they come to you, you save time, when you save time, you save money and can make more money by working on more deals. Get it?

That's one way to look at marketing as an investor's lifeblood. Now how about something as simple as a business card. Hand them out to everyone you know. When you meet someone new, give them a business card. When you're at a store leave behind a business card. When someone looks at your card and reads "Real Estate Investor" they just might be interested in what you do, and just might have a house they're trying to get rid or, or know someone who needs to sell but can't find a buyer, or they might have a piece of land they don't want, OR they just might have some money to invest and want to do it with you. It happens every day. Hand out a card, make a contact, and create new business.

As a real estate investor what happens when people start COMING TO YOU to sell, buy, rent, or invest with? Simply put, you make more money. What happens if you don't set up your marketing to bring people to you? You don't meet as many people, don't make as many deals, and DON'T make as much money. Sounds good to me!

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It's a Team Effort

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Investing in real estate is a team sport. You can't be expected to know every aspect of the business; there's just too much to know and you will end up wasting precious time on things other people can do for you or with you while you continue to look for other properties and move on to the next deal. Here is a short list of some of the people you will need to be on your team:


Your Business Team:

• Attorney who specializes in business and real estate law. He will help you set up your business and keep it in accordance with the law.
• Accountant who can help you with personal and business financial situations, and who also knows the in's and out's of real estate tax laws.

The Property Search Team:

• Real Estate Broker/Agent will help you understand the market you wish to invest in and bring the properties that will profit to you.
• Property Manager to asses multifamily properties you wish to invest in from a management standpoint. Also need a good company to manage your property once you buy it (you don't want to do it all yourself, takes too much time

The Offer Team:

• Attorney will review contracts and make sure they are legally binding.
• Lender/Mortgage Broker who is familiar with property investing (they may even provide you with good leads on other properties).
• Investors can bring in extra sources of capital for investments
• Contractor/Rehab specialist is good for property walk-throughs. They will help you determine the cost of minor & major repairs.

Other Team Members:

• Appraiser who specializes both in your market and the types of properties you target. They not only help determine value of a property before you buy but can project value for after you buy (fix, improve management, etc.)
• Architects are for when you need more than just cosmetic repairs, but major reno's.
• Insurance Agents. Every property needs insurance, and you need the best deal. Every year or two you should also get new bids on insurance to see if you can save.
• Property tax consultants are great. Tax laws can be too confusing, get professional help.
• Income tax consultants also help maximize tax advantages in properties.
• Estate Planners help you shelter and dispose of assets in case of illness or death. Good for when you have a substantial amount of properties.
• Environmental Company/industrial hygienist. Good if you suspect mold or asbestos, or any other environmental hazard on a property.
• Surveyor to help with boundary lines, elevations, etc.
• Structural Engineer in case improvements affect the structural integrity of a property.

Keep in mind that you don't need all these people at once. You can slowly add them as you need them. The people you must begin with though, are your attorney, accountant, real estate professional, and mortgage broker. Also remember that all of these people can help generate leads to other properties, investors, contacts, etc. If you plan to invest in more than one location, like me, you will need a team for each location.

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Thing on My Plate

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The past couple of weeks, since the seminar and my determination to get this business going, have been CRAZY! On my list of things to do:

• Research, research, research!! Not only research the market, but also how to start a business, where to invest, what to invest in, hard money lenders, networking groups, how to obtain information, HOT spots, and as you can imagine a plethora of other topics.
• Learn. I've read two books since the seminar. Taken two online classes: one about foreclosures, and another about setting up a business plan.
• Get the biz set-up. This is perhaps the most difficult and perplexing thing on my plate right now. We live in Hawaii, want to invest in Utah, Nebraska, and Oklahoma. Which location do I set up the business? The place where I live now, the place(s) we'll live in the future (Utah and Nebraska), both locations? I don't know. I'm talking to attorneys and accountants in Hawaii right now, but when I go to Utah in a month and a half I'll be talking to attorneys & accountants there to figure out where we'll end up setting up the biz. Either way, we'll have to do business long distance.
• Set up my POWER TEAM! I need to ask around, find, call, interview, and research the following people to put on my team for EACH STATE we plan to invest in. Attorney, accountant, tax professionals, real estate agent or broker, mortgage broker, contractors, property management companies, commercial broker, insurance broker, appraiser, architect, environmental consultants, engineers. The most immediate and important at the moment being attorney, accountant, real estate agent, & mortgage broker. The rest I can slowly add to the team depending on what I'm going to invest in (most likely I'll need a good contractor and property management company soon).
• Network. I've already joined a couple of real estate investing groups online for both Utah and Hawaii, now I just need to go.
• Find funding. I don't even want to think of this one yet...but I am. Since I'm new and haven't done much networking yet, I don't know all the investors (let alone what to say to them or how to work with them). I also don't have a mortgage broker set up; really important for funding. Yikes!! I'll get it done, but for now it's a huge stressor.
• Find properties. This is mostly done online right now since our immediate investments are on the mainland (more affordable to get into in order to start creating cash flow and earned income). Also, what we are looking at right now is mostly research. Looking at the markets, then the properties available for those market, performance expectations for various areas, which locations are better for which investments, cap rates, ROI, REO's, pre-foreclosures, etc. I need to know as much as I can about these markets now, so that when I go there (in the next month or so) I'll know what's a good deal, what's not, what I'm looking for, etc. Basically all the facts so that when I find something I can hop on it, then bring it to an investor, or get the funding from a broker.
• Schedule. I need to, and actually have, set up my class and traveling schedule for the next couple of months. This is what I have so far. Sept 12th, Honolulu, Rich U class. Sept 25th, Wholesale class, Bakersfield. Oct 9th, Foreclosure class, Dallas. Oct 18th, Mobile Home class, Utah. Oct 30, Lease Options class, Denver. Nov 13th, Rehabbing class, Las Vegas. Dec 4th, Creative Financing class, Honolulu. Unconfirmed, Dec 11, Commercial Properties class, Atlanta. I'll also be in Utah, my first investment area, from Oct 12-Nov 11 (fly out and attend classes periodically). That's 8 confirmed classes with one pending. Not bad. Plus for much of that time I'll be where I want to invest. Awesome!

As you can see, I have a lot on my plate right now. I work every day towards my goals and cross off things every day as well. That doesn't, however, diminish the fact that I still have A LOT to do!!! Wish me luck, give me advice, give me a contact, or just read this blog.

Why Real Estate?

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Ok, nothing too flowery. Real Estate is, hands down, one of the best tools of investment out there. Want to know why?

• Take a look at some of the largest companies out there. Walmart. Company revenues = $3.2 billion. Real Estate Asset Value = $78.7 billion. Sheldon Anderson (Las Vegas Sands Cooperation). Company revenues = $589 million. Real Estate asset value =$2.6 billion. Ray Kroc (McDonald's). Company Revenues = $4 billion. Real estate asset value = $29.9 billion. Ray Kroc was quoted as say that he is "not in the hamburger making business, but [that he is in] the real estate business." Ask yourself this after looking at the numbers. Which would you rather own, the business or the land?
• Cash Flow! When you own real estate you can easily generate passive income that pays for itself and then puts money in your pocket. Rental properties, land, leasing, etc. are all examples of how a real estate investment can generate enough income to pay itself off and then have excess money that goes into your pocket every month after all expenses paid.
• Control. When you own stocks, bonds, mutual funds, etc. you generally give control over your investments to a broker or financial advisor. With real estate you have a tangible asset. You can visit it, fix it up, manipulate the operations so as to increase value and performance, etc. You aren't being reactive to market conditions (buy or sell), you are being proactive.
• Appreciation. The average yearly rate of appreciation for the United States is 6%; that means that higher performing markets appreciate at much higher rates, and some markets perform lower. Find the market and pick your rate. Not only does your property increase in value over time, but if it cash flows, that increases over time as well. Consider this. You buy a $200,000 property with 20% down ($40,000) and a mortgage of $160,000. You only have $40k of your own money in the investment., and you get $1,000 a month in cash flow after all expenses paid. Over 30 years time (standard mortgage term) your property pays for itself through cash flow (so the property, not you pays off the mortgage), you then have $1,083,678 in total asset value (if you use the standard 6% rate of appreciation), and your monthly cash flow increases over time to $3,243 a month ( based on average rental growth of 4% a year). So, your initial $40,000 investment is now worth over $1 million, and you still get over $3k a month from it.
  <><><><> <><><><><><><><><><><><><><><><><><><><><><><><> <><><><> <><><><><><><><><><><><><><><><><><><><><><><><> <><><><> <><><><><><><><><><><><><><><><><><><><><><><><> <><><><> <><><><>/><><><><><><><><><><><><><><><><><><><><>

  Stocks vs. Real Estate Over 30 years
  Orig Invest Amt	Appreciation/Growth	Real Estate Value	RE ROI	Stocks	Stock ROI
  $40,000	6%	$1,083,678	2709%	$216,736	542%
  $40,000	8%	$1,863,455	4659%	$372,691	932%
  $40,000	10%	$3,172,619	7932%	$634,524	1586%

  
  *ROI is Rate of Return/ ROI% = return on investment ÷ original investment

• Leverage and Other People's Money (OPM). Basically what that means is that you can put little to none of your own money down and still get a great return. In that last example all you did was put 20% down while the bank (other people's money) took care of the remaining 80%. Some banks will finance 90-100% of the worth. With stocks you can still use OPM by buying on margin, but you can't borrow more than 50% of the stock's worth.
• Depreciation. Basically you can use the yearly expected deterioration & wear and tear on your property as a tax deduction. For residential investments it's 27.5 years, while commercial property it's 39 years. The equation looks like this: (total asset value - land value) ÷ depreciable years = Annual depreciation amt. Land is not depreciable because it's not an actual structure. Here's an example of a residential asset that's worth $19.7 million (land value $3 million). ($19,700,000 - $3,000,000) ÷ 27.5 = $607,273. If, after all expenses and debt this property has a cash flow of $300,000 that means that (depreciation - cash flow = 307,273) you can show depreciated value of your asset to be $307,273, so you don't have to pay taxes on the $300,000 cash flow. Now, that's a lot of mula. (You must beware though, once you sell the property the total amt depreciated through the years you owned the property will be due. One way to avoid this is to do a 1031 exchange.)
• Refinancing. You buy a property, it increases in value, you borrow from the bank the difference between the amount paid and the current value. The money is tax free and all yours. Example: bought property for $9 million, 5 years later it's worth $15 million. The property covers the increased mortgage amount and you pocket or reinvest the $6 million.
• Asset Protection. First, you can insure your investment; in fact, you are required too, and your asset pays for the insurance, it's tax deductable, and you get money left over. You can own properties through LLC's and other coorporate entities that protect your investment. Also, there are a variety of other tax and legal advantages to owning real estate that other investments just don't compare to at all. Check with your attorney or tax accountant for more about that.
• 1031 Exchanges. You buy a property, it increases in value, you sell it, take the profit and reinvest it in another property TAX FREE!! Of course, you have to do it right and have a 1031 specialist to help you through it, but this is a great way to contiually build your asset value.
• Hedge against inflation. Since 1913 the average yearly inflation amount is 3.5%, or 4.1% if you factor out the great depression (the only time inflation was in the negatives). Savings bonds get you 2-3%, real estate gets you 6% PLUS a plethora of tax advantages AND cash flow.
• It's physical. When you own real estate, you own an actual physical asset. You can visit it, fix it up, force appreciation, etc. Stocks and the like, come and go at the touch of a button and can go from a great investment to zero in seconds, while real estate changes value at slower rates that allows you to, if you watch market conditions, etc., easily avoid pitfalls and depreciation.

*information from this article was taken from Ken McElroy's book The Advanced Guide to Real Estate Investing (a Rich Dad advisor book).

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Rich Dad Seminar

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Wow! Last weekend was more than information packed, but inspiring and life changing. Nick and I had the chance to attend a Rich Dad seminar in Honolulu all about the in's and out's of investing in real estate right now. I learned a ton, but I thought I'd share a bit about what went on.

Fundamentals & Rules of Investing

• You need to have an exit strategy planned and set up before you buy a property. Exit strategies can be anything from renting, re-selling, lease options, rehabbing, etc.
• In real estate you make money when you buy a property and collect when you sell.
• You buy and sell to create cash, buy and hold to create wealth.
• The more you KNOW, the more you BUY, and the more you MAKE.
• You need more skills in order to buy more expensive.
• DOVETAILING!!! In order to maximize income/profit you need to use multiple strategies for each deal. Example: buy WHOLESALE with OTHER PEOPLE'S MONEY, do a REHAB, then use a LEASE OPTION to sell. 4 strategies were used in this example. The more strategies you use, the more money you are likely to make.
• What you don't know WILL cost you money. For example, if you don't know how to use lease options and you rent or sell instead of using that strategy that would have made you more money, then you lost money because of lack of knowledge.
• If you want to be financially free you must first go into debt in order to get out of debt. Just play Kiyosaki's Cashflow game to get an idea of how that one works.
• Knowledge builds confidence and destroys fear.
• The value of a commercial building is directly proportionate to the income it generates.

Some of My AHA! Moments

• If you own both the land and building that a commercial property is on, lease the land and sell the building. You receive money from the sell of building and continual cashflow from the land you lease. It's a win, win situation.
• You can't make profit on a deal you don't do.
• Self directed IRA/401K's can be used to invest in Real Estate.
• Every time you use OTM (other people's money) and you profit, you're rate of return (ROI) is INFINITE!
• Over borrowing can be good. Over borrow to cover expenses on loans, mortgages, expenses, until you profit from a deal, then pay it all off and keep left over.
• Never pay off good debt in a lump sum! It pays itself off. Good debt is debt that makes you money. Example: a mortgage on an apartment building that brings in a steady cashflow after all expenses are paid is good debt. The investment pays off the mortgage and you still earn money. Bad debt is debt that does not pay itself off, but takes money out of your pocket. Example: you bought a new car; that car does not make you money, it takes money out of your pocket. Therefore it is bad debt. You can turn it into good debt by using the car as a company car, and a marketing tool by putting magnets on it to promote your business.
• When it comes to commercial deals banks look at the deal itself and not your personal income. If the deal sells itself and will bring in money.
• Contract Assigns: you purchase a property from an owner and have it say on the contract "and/or assign," meaning that you can assign the contract over to someone else (your buyer) and you don't have to pay a penny on it! You do, however, make money.

I did, obviously, learn a lot more at the three-day seminar, but these were some of the most eye-opening learning tools I gained. I am so excited to keep learning more about real estate investing. The more I learn, the more opportunities I see, the opportunities I see, the more money that can be made, the more money that can be made, the closer I am to living the life that I want.

My Little Dilemma

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I'm sure we've all come across an annoying salesman. All you wanted to do was "take a look," but no, he was on your tail, up selling, talking, and just generally annoying you from the second you walked into the store. I know I'm not the only one who was ever in that situation. Flash backwards to my first ever job with a real paycheck, taxes, everything. It was just a summer thing, in between 11th and 12th grade. I was still young, only 16, so not very many places would hire an inexperienced "youngin." I hate to say it, but yes, I was a telemarketer. The pressure was unbelievable. If I didn't sell anything all day I felt horrible. On top of that I felt like I was swindling the poor and elderly into more debt and problems. Needless to say, I hated that job, and never took another one like it. Why? I hate salesmen and I hate selling.

Now why do I bring up this topic? Well, I have a problem. Numerous times in Robert Kiyosaki's books he discusses the importance of becoming a good salesman. He often refers to the fact that he isn't the best writing author, but a best selling one. That makes perfect sense. Although I find his books interesting, I must admit that I've seen better writing. The way he suggests becoming a good salesman is through finding a job that will teach you to become one and force you to overcome those fears of rejection (I'm not so much afraid of rejection, I just hate annoying people). He refers to his 2 years with the Xerox company. At first he was the worst salesman in the company, repeatedly, for over a year. Then he began to learn, grow, and overcome those fears. Soon he was the top selling rep for the company. He suggests getting a job with a company that has a good selling program or joining a network marketing company. My dilemma? I don't wanna to that.

I've thought about it for a long time. I could potentially work for a network marketing group. I've even thought of two good companies that I find would be a good fit for me, but...I don't wanna. So, should I bite the bullet and try out his advice or just learn about selling from books, seminars, and the building up of my own business? It's hard to say, but either way I've got a decision to make.

Just Finished Kiyosaki's Guide to Investing

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Having just finished reading Kiyosaki's third book Rich Dad's Guide to Investing: What the Rich Invest in, that the Poor and Middle Class Do Not, I thought that I'd share my thoughts on what I learned and thought of the book.


First off, this book was a bit more difficult to read that the first two. It is 400 pages, the first 250 of which are fairly redundant, general (not that I didn't learn anything, but it was a little on the boring side). The first half of the book primarily deals with teaching the mindset of successful and unsuccessful investors (attitudes and habits that help or hinder). It wasn't until the last 150 pages that the book really picked up for me and I was able to learn a lot and get excited about learning more. This last part of the book goes over what successful investors actually do. Some stories are given, diagrams presented, and facts thrown at you. Now keep in mind that these books by Kiyosaki still deal in generalities, so to find more in-depth information about investing you can read the Rich Dad Advisor books, and books by other people (I'll supply the list I came up with while reading in another post).



So, with that said...here are some things that I found interesting:

• Five phases to investing and becoming wealthy. Phase 1 = Being mentally prepared to be an investor. Phase 2 = Deciding what type of investor you want to be. Phase 3 = How to built a strong business. Phase 4 = Becoming a sophisticated investor. Phase 5 = Giving back to society.


• In order to get into the top 10% of money making deals you must, at least, be considered an accredited investor. In order to qualify as an accredited investor you must: make at least $200,000 in annual income or over $300,000 as a couple, or have at least 1 million dollars in net worth.


• Investing is not trading, buying, and selling. "Investing is a plan, often dull, boring, and almost mechanical process of getting rich." If the formula (plan) is too complex; it is not worth following. If you can't do it automatically after you learn it, you shouldn't follow it. Follow a formula that will make you rich, and follow it!


• Before really delving into the investment world, you must first set up a plan for both financial security and comfort. Meet with and interview financial planners until you find one you like; then make a plan. After that is done, work on converting earned income into portfolio &/or passive income as efficiently as possible.


• Investing isn't risky, investors are.


• After accredited investor comes a qualified investor, then sophisticated and finally inside and ultimate investors. Accredited investors have excessive cash, that's it. Qualified investors have excessive cash and education. Sophisticated investors have excessive cash, education, and experience. The last two have all three but are on the inside of investments (making the deals that others buy, or selling the stock and taking companies public).


• There is magic in making mistakes: Levi Strauss (didn't strike it rich with the 49'ers, but created Levis Jeans), Christopher Columbus (didn't discover a new trade route to the Indes, but found America), Thomas Edison (failed over 100 times before invented the light bulb), Warren Buffet (bought Berkshire Hathaway, the company initially failed, but he built it up again). "When you come to the boundaries of what you know, it's time to make some mistakes." "Success is the ability to go from one failure to another with no loss of Enthusiasm. " (Winston Churchill)


• Five D's to becoming rich: Dream, Dedication, Drive, Data, Dollars. "In reality, it is the focus on the first 3 D's that ultimately gain you the data and dollars you need to become very, very rich. In other words, the data and the dollars are derived from having a dream, being dedicated, and having the drive to win."


• The 90/10 riddle (why 90% of the money is controlled by 10% of the people). The 10% create assets out of ideas and buy other people's assets (mutual funds, etc.). They are both a creator and buyer of assets; they create enough to pay for the buying.


• The B-I Triangle (your team): business owner, employees, specialists, investors.

• The foundation for a good business. First must have good team, strong spiritual and business mission, and excellent leadership. Then understanding and management of cash flow, communications, business systems, legal representation, and lastly product. If one part is weak, the company will crumble.

• Check out http://www.richdadgold.com/


• Check out http://www.richdadbook3.com/, http://www.richdadbook1.com/, http://www.richdadbook2.com/


• "A person's financial reality will not change until he or she is willing to go beyond the fears & doubts of his or her own self-imposed limits."


• Must have a plan to not only acquire wealth, but what to do when you have too much of it.


• Ideas & Knowledge=money

These are some of the main key points that I learned from reading Kiyosaki's Guide to Investing. There are many other things that I learned which I will share in later posts since they require more in-depth writing and not just a single bullet point. For now, I found this information to be extremely helpful. It has helped me change my mind and attitude about what investing entails.

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Recommended Books

Cover of Wealth of Nations

Do you remember me saying what kind of student I was? I always did every bit of homework, and also read the extra stuff the professors would give, so of course one of the things I always pay attention to while reading books such as these are the other recommended reads. I highlight them, write it down, and anticipate which one I'll read next. At the moment I am going to try and finish all the books that my husband and I have (about 6 more of the Rich Dad books, including some Rich Dad advisor books, and two of Donald Trumps). So, at the moment I'll have to finish all the books I have. I thought that I would make a short list of some books Kiyosaki recommended in Cashflow Quadrant, as I am not quite finished with his book on investing.

At the Crest of the Tidal Wave (Economics) by Robert Prechter
Awaken the Giant Within (Personal Development) by Anthony Robbins
Creating Wealth (Real Estate) by Robert Allen
Deals on Wheels (Real Estate) by Lonnie Scruggs
E-Myth (Business) by Michael Gerber
Emotional Intelligence (Personal Development) by Daniel Goleman
God Wants You to be Rich (Wealth) by Paul Zane Pilzer
The Great Boom Ahead (Economics) by Harry S. Dent, Jr.
How to Make Money in Stocks (Stocks) by William J. O'Neil
Influence (Personal Development) by Robert Cialdini
Over the Top (Sales) by Zig Ziglar
The Sovereign Individual (Economics) by James Dale Davidson & Lord William Reese-Mogg
Stone Soup (Leadership) by Marcia Brown
Trade Your Way to Financial Freedom (Trading) by Dr. Van Tharp
Trading For a Living (Trading) by Dr. Alexander Elder
The Wealth of Nations (Economics) by Adam Smith
Think and Grow Rich (Wealth) by Napolean Hill
Unlimited Wealth (Wealth) by Paul Zane Pilzer
What Works on Wall Street (Stocks) by James O'Shaughnessy
Who Stole the American Dream? (Network Marketing) by Burke Hedges
The Worldly Philosophers (Economics) by Robert Heilbronner

Recommended Audio Tape Sets

Closing the Sale (Sales) by Raymond Aaron
Goals, Crossing the Goal Line (Goal Setting) by Raymond Aaron
Secrets of Great Investors (Investing) by Knowledge Products
Power-Talk (Personal Development) by Anthony Robbins

The 7 Levels of Investors

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Ok, ok, ok. I give up. I wasn't going to share this because it is so clearly explained in the book, but I want to learn a little more, so I though...why not. Kiyosaki uses John Burleys idea of the 7 levels of investors as a guide to help us determine where we are and where we want to be. He explains that before becoming a level 5 or above you should first become a proficient level 4 investor.

Level 0 Investors: Have nothing

• Have no money to invest
• Spend everything and/or more than they make

Level 1 Investors: Borrowers

• Solve financial problems by borrowing money (also invest with borrowed money)
• Buy depreciating toys or doodads like boats, nice new cars, etc. just because adds say "no down, easy monthly payments.
• Love to shop and charge their credit cards to the max
• Get all equity out of home to pay off credit cards, shop and max out cards again, borrow against home again...you get it.

Level 2 Investors: Savers

• Put aside a small amount of money on a regular basis
• Earn little to practically no interest in savings accounts, CD's, checking accounts, etc.
• Believe in paying cash; very scared of credit cards and debt

Level 3 Investors: Smart Investors (3 categories)

• Aware of need to invest. Usually participate in 401k plans, mutual funds, stocks, bonds, etc.
• 3a: Convinced themselves that they don't understand money and never will. They let money sit and do little in their retirement plan or turn it all over to a financial planner.
• 3b: Cynical about investing. They know how you get swindled, always have intelligent sounding answers, but also always negative. They follow the market, but buy too late because they get their information late.
• 3c: Gamblers. They look at the stock market as luck and a roll of the dice. They have no rules or principles when trading. They try and act sophisticated about their investments without knowing who or what the game is about.

Level 4 Investors: Long-Term

• Actively involved in their investment decisions.
• Have a clearly laid out long-term plan that will allow them to reach financial goals.
• Educate themselves before entering an investment.
• Seek advice from competent financial planners

Level 5 Investors: Sophisticated

• Have good money habits and solid foundation of money and investment savvy
• Focus their investments, not diversify
• Good track record of coming out on top of deals
• Put their own deals together
• Risk less than 20% of all their capital in speculative ventures. Losing this 20% would not hurt them.
• Have clear principles and rules for investing

Level 6 Investors: Capitalists

• Create investments and sell them to the market by using the talents and finances of other people.
• Movers and Shakers of the economy (Kennedys, Rockefellers, Fords, Gettys, Perots)
• Make other people rich, create jobs, and make things happen all while increasing their wealth.
• Good or bad economic times, they make money. Involved in ventures years before it becomes popular to the masses.
• Returns of 100% to infinity are expected.

Read, read again, then re-read those 7 levels of investors. Where do you fit in? Where do you want to be? Do you know anyone at any of those levels? What can you learn from them (good or bad)? Start making plans now to get you where you want to be financially.

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Baby Steps

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In order to help us get off our feet Kiyosaki recommends starting with the 7 Baby Steps to get you started on the road to Success from his book Cashflow Quadrant.

1. Fill out a financial statement. Set goals for where you want to be in 12 months, 5 years, etc. Set goals to decrease consumer debt and increase assets.

2. Take control of your cashflow. Set goals for your cashflow and set aside money every paycheck that will go towards assets. PAY YOURSELF FIRST, not last!

3. Learn all about what is/is not risky. Define for yourself what you think risk is. Spend at least 5 hours a week learning so you can decrease the risk involved in your investments. “If you want to take on great wealth, quickly take on great financial problems.”

4. LEARN!! Become a proficient level 4 investor (levels of investors are in his book Cashflow Quadrant). Every week call up or visit realtors, property managers, stock brokers, financial planners, business owners and brokers. Ask them questions, advice, etc. Find your niche in the market. Specialize your skills.

5. Seek MENTORS. Find role models, mentors, and reverse mentors for your field. A reverse mentor is someone who is the opposite of what you want to become. You learn what not to do from their example.

6. Make mistakes. Start small, put a little money down. If you make a mistake, learn from it and move on.

• “Only fools expect everything to go the way they want.”
• “We can never know things beforehand, and we often only learn things when we need to learn them….Try new things and expect disappointment. Many people never start projects simply because they do not have all the answers. You will never have all the answers. Begin anyway.
• “The size of your success is measured by the strength of your desire, the size of your dream, and how you handle disappointment along the way.”

7. Believe in yourself and start today! “Listen to your doubts, fears, and limiting thoughts, and then dig deeper for the deeper truth. Prepare daily to become bigger than your smallness.”

What I Learned from CASHFLOW QUADRANT

After finally reading "Rich Dad Poor Dad" I was psyched to read the next book, "Cashflow Quadrant." My husband and I had already signed up for a 3 day seminar that was fast approaching and I wanted to learn as much as I could before I went so I would understand what people were talking about. It took me two steadfast days, but I got it read, and these are some of the things I learned.

1. There are four main types of people out there: Employee's, Self-Employed, Business wners, and Investors. Of those four Employee's and Sefl-Employed work for their money, while Business Owners and Inverstors have their money work for them. Most people are the E's and S's (Empolyees/Self-Employed). The rich are the B's and I's (Business Owners/Investors).

Employess: People who have a job, a boss, and work for a paycheck. This is the majorityof people.

Self-Employed: People who go into business for themselves, may have some people under them, but they still work for their money. This can comprise of lawyers, doctors, consultants, small business owners, etc. If they left their business for a year
it would probably crumble.

Business Owners: People who own a big business system and have hundreds of
employees. They usually hire people to do the work, thus freeing up their own time. They own the business, but other people keep it running. If they left for a year, the business would be more profitable.

Investors: People who invest in stocks, real estate, and other areas. They build up
their portfolio of assets and earn money through their investment transactions. Their money works for them.

2. Kiyosaki suggests that if you want to move from being an E or an S to a B or an I that you first become a business owner of sorts so that you can learn about how businesses are run, how to read their financial statements, etc. This is a learning experience. Your business becomes a mentor, it increases your cashflow, and allows you more time to invest. The most experienced Investors are those who first owned a business. There are three main ways you can make this move.

• First, build your own business.
• Second, buy into an existing business system called a franchise.
• Third, become part of a network marketing group.

3. Kiyosaki introduces the idea of buying up Tax Lien Certificates as an investment. For example: if someone doesn’t pay their property taxes, you can pay them. They them become indebted to you. When they do pay they pay the amount owed, plus percentage gained.

4. Kiyosaki also introduces Wraps, or Lease Purchase Agreements. Basically you become the bank or lender in the sale of an asset. You may have bought a $100,000 home for $70,000 but them put it up for sale for $100,000 with no down and low monthly payments. The purchaser of the home them signs a lease purchase agreement where they pay you (the lender) and not a bank for the mortgage. The nice thing about this is that you can choose the interest rate. Kiyosaki usually has it around 10%. So, you are still paying your $70,000 mortgage at about 5-6% (about $400) while the purchase is paying you the %100,000 lease at 10% (about $877). That gives you a monthly cashflow of $477. If the purchaser defaults on the lease, you can foreclose and find another person to purchase the home while keeping the money already made.

5. Seminars on tape by Raymond Aaron were recommended. Goes over keys to success: Dream big, think long term, underachieve on a daily basis (smaller goals are easier to achieve the huge over the top ones), take baby steps.

6. I loved this quote by Erik Hoffer. Times have changed, yet we are still taught to think financially in terms of the industrial age. It is now the information age. Those who change with the times are the ones on top of the game.

• “In times of change, learners inherit the earth. While the learned, find themselves beautifully equipt, to deal with a world, that no longer exists.”

7. Problem solvers are the money earners because at the flipside of every problem there is opportunity.

8. When the world gets excited about something you should be afraid, when the world is afraid, your should be excited. (aka, don’t follow the crowd off the cliff).

Kiyosaki also goes a lot more in depth about the different kinds of investors (I recommend reading that in the book as it is very extensive). But he does recommend becoming proficient at level 4 investing before you move onto 5 or 6.

What am I Doing?

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This blog is mainly written for myself. It's a way for me to keep track of information I'm learning, the steps I'm taking, and the actions I'm doing on my path to greater wealth and understanding.

It's funny that one book could have done so many things for me. I remember that I bought "Rich Dad Poor Dad" by Robert Kiyosaki many years ago on a whim. I'd heard that it was a good book. Since browsing the discount section of bookstores and libraries was something I love to do, it was no surprise that I ended up buy this book I'd heard so much about.

So, there it was. On my bookshelf with many other bargain buys. I was in school at the time studying to be a high school English teacher. I was at a competitive university (Brigham Young University). It was a school filled with perfectionists and overachievers. I was one of them. My school schedule was very busy. Plus I was one of those students who always did all the homework, and even the suggested readings. On top of that I was working two jobs. Needless to say, "Rich Dad Poor Dad" stayed on that shelf for a long time.

I finally finished school and accepted a job as an English teacher at a local residential treatment center. Again, I worked hard. Most of the time, I was the last teacher to leave the school (not the first to show up; I just loved my sleepy time). I'd go home and do all I could to relax. I read all day with my students, on my own (to prepare lesson plans and get ideas), and in class (I had to take extra classes to work at this school). My time was nowhere to be found, and I did not want to read anything else because I was already on book overload (first from school and now from work).

The next time I even thought about that "Rich Dad" book sitting on my shelf was during a parent teacher conference. I was talking to the substitute who was going to take my class for the day. He loved books and was currently reading "Rich Dad Poor Dad." My thoughts turned to that book on my shelf, "I have that book, but haven't read it yet." "You haven't read it?" was his reply, "You need to get on that."

It took about two years for me to "Get on that." I had quit my job because of all the stress it gave me, and was looking for something else. I decided that I didn't want to work for someone else if I could help it. As it would happen I ended up marrying that substitute. He is now in the military and we live in Hawaii. He had been reading some of Kiyosaki's other books and signed us up for a free seminar. We went, were inspired, and signed up for a 3 day seminar (coming up next weekend). I dusted off my book and finally finished it. It took me two days to read the next book, and now I'm on to the third.

What am I doing? I going to put to use the things I'm learning. I don't want to work for someone else. I want to help those around me be financially free. I want to spend time with my family and friends. I want to travel the world. And, I want to live a long full life that isn't worried about money all the time. So, what am I doing? I'm changing my life. I know it will take a while, but I am prepared, ready to learn, and willing to change.

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