Robert Kiyosaki, famous financial personality and creator of the Rich Dad series, is a big proponent of investing in real estate to generate cash flow. According to Kiyosaki, there are three things you can control with real estate that aren’t available with many other types of investments.
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In a recent blog post on his website, Kiyosaki shared this perspective, along with his four core real estate principles.
3 things you can control with real estate
One of the main reasons Kiyosaki prefers real estate is that it offers a level of control that is hard to find in other investments. Specifically, Kiyosaki says you can control how you earn, the valuation of your investment, and who you do business with.
How you will win
Unlike many investments, you can choose whether you want to reap capital gains or income from your real estate investment. Kiyosaki’s investment philosophy is based on generating cash flow, so he invests in real estate for income. But unlike a stock dividend, for example, which is set by a board of directors and out of the control of investors, if you’re buying a rental property, you can choose how much you want to charge for rent. You can also choose to raise it at any time as long as market conditions bear it.
Valuing your investment
While you can’t dictate the value of your rental property, you can definitely do things to improve it. For example, you can apply a new coat of paint, install new windows or floors, increase the square footage, or otherwise upgrade your property to make it instantly more valuable. This type of control does not apply to “paper” assets such as shares.
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Who do you do business with?
When you invest in rental real estate, you choose who your business partners are. For example, you at least have some say in who you rent to, who you borrow money from, and who will manage your property if you don’t manage it yourself. Making good choices in these areas can also help maintain and increase the value of your investment.
Kiyosaki’s 4 Basics of Real Estate
According to Kiyosaki, investors need to increase their financial intelligence when it comes to real estate investing. Instead of betting the house, for example, Kiyosaki stresses that you need to be a real investor. Here are his four real estate fundamentals.
Own things that put money in your pocket
Kiyosaki’s primary investment goal is cash flow. He emphasizes that real estate investors should look first for income and second for capital appreciation. To Kiyosaki, any “investment” that doesn’t put money in your pocket is a liability, not an asset, and you should be concerned with building assets in your investment portfolio.
Buy investments that can stand on their own
Kiyosaki does not believe in owning investments that rely on other investments to support or sustain their value. Treat each investment as its own, separate entity and only own assets that are self-sustaining.
Control, manage and improve your investment
One of the main reasons Kiyosaki believes in real estate as an investment is that you have ways to control, manage and improve it. For example, you can choose where you want to buy your property, how much you are willing to pay for it, and what income you can get from it. You can also improve your property and make it more attractive to tenants, thereby charging even more rent. Kiyosaki says this is where financial education is important. By knowing best how to use your upgrades, you can maximize your revenue while minimizing your expenses.
Know when to sell before you buy
Kiyosaki says the “hard and fast rule” when it comes to real estate is that you should know when you’re going to sell before you buy. This does not mean that you have a set date in the future when you will sell your property. It just means you need to have an exit strategy.
For example, you may have a specific price in mind at which you want to sell, or a time based on events in your life, such as when you retire. While Kiyosaki is typically a long-term, buy-and-hold investor when it comes to real estate, he says every smart investor should have a price or event in mind at which point they would be willing to sell.
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This article originally appeared on GOBankingRates.com: Robert Kiyosaki: 3 Things to Control When Investing in Real Estate