Rich Dad Poor Dad | S5 – E29 | Lesson V | Continuation of Investing

$40,000 is created in the asset column. Money is invented without being taxed. At 10 percent interest, $4,000 a year in cash flow is added to income. – Robert Kiyosaki

During this depressed market, Kim and I were able to do six of these simple transactions in our spare time. While the bulk of our money was in larger properties and the stock market, we were able to create more than $190,000 in assets (notes at 10 percent interest) in those six “buy, create, and sell” transactions. That comes to approximately $19,000
a year income, much of it sheltered through our private corporation. Much of that $19,000 a year goes to pay for our company cars, gas, trips, insurance, dinners with clients, and other things. By the time the government gets a chance to tax that income, it’s been spent on legally allowed pre-tax expenses.

Rich dad Poor Dad

During this depressed market, Kim and I were able to do six of these simple transactions in our spare time. While the bulk of our money was in larger properties and the stock market, we were able to create more than $190,000 in assets (notes at 10 percent interest) in those six “buy, create, and sell” transactions. That comes to approximately $19,000 a year income, much of it sheltered through our private corporation. Much of that $19,000 a year goes to pay for our company cars, gas, trips, insurance, dinners with clients, and other things. By the time the government gets a chance to tax that income, it’s been spent on legally allowed pre-tax expenses.

This was a simple example of how money is invented, created, and protected using financial intelligence.

Ask yourself: How long would it take to save $190,000? Would the bank pay you 10 percent interest on your money? And the promissory note is good for 30 years. I hope they never pay me the $190,000. I have to pay a tax if they pay me the principal, and besides, $19,000 paid over 30 years is a little over $500,000 in income.

I have people ask what happens if the person doesn’t pay. That does happen, and it’s good news. That $60,000 home could be taken back and re-sold for $70,000, and another $2,500 collected as a loan-processing fee. It would still be a zero-down transaction in the mind of the new buyer. And the process would go on.

The first time I sold the house, I paid back the $2,000, so technically, I have no money in the transaction. My return on investment (ROI) is infinity. It’s an example of no money making a lot of money.

In the second transaction, when re-sold, I would have put $2,000 in my pocket and re-extended the loan to 30 years. What would my ROI be if I got paid money to make money? I do not know, but it sure beats saving $100 a month, which actually starts out as $150 because it’s after- tax income for 40 years earning low interest. And again, you’re taxed on the interest. That is not too intelligent. It may be safe, but it’s not smart.

A few years later, as the Phoenix real estate market strengthened, those houses we sold for $60,000 became worth $110,000. Foreclosure opportunities were still available, but became rare. It cost a valuable asset, my time, to go out looking for them. Thousands of buyers were looking for the few available deals. The market had changed. It was time to move on and look for other opportunities to put in the asset column.

“You can’t do that here.” “That is against the law.” “You’re lying.”
I hear those comments much more often than “Can you show me how to do that?” The math is simple. You do not need algebra or calculus. And the escrow company handles the legal transaction and the servicing of the payments. I have no roofs to fix or toilets to unplug because the owners do that. It’s their house. Occasionally someone does not pay. And that is wonderful because there are late fees, or they move out and the property is sold again.

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