Common Sense On Buying Investment Property
Author of the Rich Dad book series, Robert Kiyosaki, says his "Rich Dad" swore that investing is not "rocket science".
He suggested it's just an issue of reasoning.
But we all know that wisdom is not, in fact, terribly common.
Kiyosaki also says, the lowest levels of investors are individuals who simply haven't studied the process.
They adopt the viewpoint that investing is either a scam or just too risky.
Others leap before they look and end up suffering a loss.
The smarted opinion anyone can have concerning investing in real estate is just to educate yourself.
If, in your haste to make money, you start investing without that education, you will be doing yourself a great disservice.
Time is your most important resource and if you squander it, you will usually find that your money will be lost as well - money you have that you end up squandering, equity you could've saved if you'd just invested the time to figure out the techniques of successful investors.
"That is just fine," you might say.
You presumably will agree that getting a good education is typically a good thing.
At the end of the day, knowledge is power.
"What training do I need?" may be your 1st question.
Your 2nd is probably, "How do I get it?" The very first skill you might want to study is some essential accounting, which is not as nebulous as it sounds.
Accounting is the language of finance.
If you're investing in a company or a piece of property or what have you, you will need to be willing to check up on it to see whether it will be a benefit (make you money) or a burden (cost you money).
It looks like logic when you look at it, doesn't it? But in order to be able to establish these things, you will need to be able to evaluate your financial-statements.
There are four common types of financial statements: cash flow statements, income statements, balance sheets, and statements of changes in share-holder equity.
The last is fairly self-explanatory, and addresses the difference between at 2 individual points in time.
A shareholder's equity is it's total assets minus it's total expenses, basically the net worth of a company.
The cash flow statement is a form that specifies the cash needed to make a company operate, plus where that money came from.
Wikipedia equates a corporation to a large kettle of liquid which captures more of the liquid and also has pipes runningout of it - into the investor's pockets and others to whom the company is in debt.
The cash flow statement attempts to explain the displacement of that liquid - or the flow of the money.
The earnings (or profit-and-loss statement) watches out for a businesses earnings and losses due to expenditures over a period of time, while a balance sheet gives a description the same thing for 1 single moment in time and presents your liabilities and assets.
It may seem quite straight-forward until you think about Kiyosaki's advice on telling your assets and liabilities apart.
He said that your lending institution, for example, will declare your home as an asset.
It sounds rational.
After all, it is something you own, right? But as stated by Kiyosaki's rich dad's statement of liabilities and assets, your house is actually a liability.
It's a liability because it will eventually cost you money in dues and updates.
It undoubtedly isn't earning money for you, and up to the time it begins doing that (say, you move out and are able to charge enough rent to make a profit), then it is not an asset.
Not that the bank is lying to you outright.
Your house is an asset on THEIR balance sheet because it is making money for them.
That's the type of thing you can decide for yourself and ascertain whether you are making or losing money on an investment, if you make the time to educate yourself education.
Don't forget: Knowledge is POWER.
He suggested it's just an issue of reasoning.
But we all know that wisdom is not, in fact, terribly common.
Kiyosaki also says, the lowest levels of investors are individuals who simply haven't studied the process.
They adopt the viewpoint that investing is either a scam or just too risky.
Others leap before they look and end up suffering a loss.
The smarted opinion anyone can have concerning investing in real estate is just to educate yourself.
If, in your haste to make money, you start investing without that education, you will be doing yourself a great disservice.
Time is your most important resource and if you squander it, you will usually find that your money will be lost as well - money you have that you end up squandering, equity you could've saved if you'd just invested the time to figure out the techniques of successful investors.
"That is just fine," you might say.
You presumably will agree that getting a good education is typically a good thing.
At the end of the day, knowledge is power.
"What training do I need?" may be your 1st question.
Your 2nd is probably, "How do I get it?" The very first skill you might want to study is some essential accounting, which is not as nebulous as it sounds.
Accounting is the language of finance.
If you're investing in a company or a piece of property or what have you, you will need to be willing to check up on it to see whether it will be a benefit (make you money) or a burden (cost you money).
It looks like logic when you look at it, doesn't it? But in order to be able to establish these things, you will need to be able to evaluate your financial-statements.
There are four common types of financial statements: cash flow statements, income statements, balance sheets, and statements of changes in share-holder equity.
The last is fairly self-explanatory, and addresses the difference between at 2 individual points in time.
A shareholder's equity is it's total assets minus it's total expenses, basically the net worth of a company.
The cash flow statement is a form that specifies the cash needed to make a company operate, plus where that money came from.
Wikipedia equates a corporation to a large kettle of liquid which captures more of the liquid and also has pipes runningout of it - into the investor's pockets and others to whom the company is in debt.
The cash flow statement attempts to explain the displacement of that liquid - or the flow of the money.
The earnings (or profit-and-loss statement) watches out for a businesses earnings and losses due to expenditures over a period of time, while a balance sheet gives a description the same thing for 1 single moment in time and presents your liabilities and assets.
It may seem quite straight-forward until you think about Kiyosaki's advice on telling your assets and liabilities apart.
He said that your lending institution, for example, will declare your home as an asset.
It sounds rational.
After all, it is something you own, right? But as stated by Kiyosaki's rich dad's statement of liabilities and assets, your house is actually a liability.
It's a liability because it will eventually cost you money in dues and updates.
It undoubtedly isn't earning money for you, and up to the time it begins doing that (say, you move out and are able to charge enough rent to make a profit), then it is not an asset.
Not that the bank is lying to you outright.
Your house is an asset on THEIR balance sheet because it is making money for them.
That's the type of thing you can decide for yourself and ascertain whether you are making or losing money on an investment, if you make the time to educate yourself education.
Don't forget: Knowledge is POWER.
