Rich Dad Poor Dad | S5 – E33 | Lesson V | Two Types of Investors & How to Get Started

Great opportunities are not seen with your eyes. They are seen with your mind. Most people never get wealthy simply because they are not trained financially to recognize opportunities right in front of them.

Rich Dad Poor Dad

I love this. When it comes to money-making opportunities, they’re not seen with my eyes. I had to prime my mind to get the most out of it. I get a number of ideas on a routine basis that can propel my finances to even greater heights, simply by investing in my mind.

I look at money much like my game of tennis. I play hard, make mistakes, correct, make more mistakes, correct, and get better. If
I lose the game, I reach across the net, shake my opponent’s hand, smile, and say, “See you next Saturday.”

There are two kinds of investors:

  1. The first and most common type is a person who buys a packaged investment. They call a retail outlet, such as a real estate company, a stockbroker, or a financial planner, and they buy something. It could be a mutual fund, a REIT, a stock or a bond. It is a clean and simple way of investing. An analogy would be a shopper who goes to a computer store and buys a computer right off the shelf.
  2. The second type is an investor who creates investments.
    This investor usually assembles a deal in the same way a person who buys components builds a computer. I do not know the first thing about putting components of a computer together, but I do know how to put pieces of opportunities together, or know people who know how.

It is this second type of investor who is the more professional investor. Sometimes it may take years for all the pieces to come together. And sometimes they never do. It’s this second type of investor that my rich dad encouraged me to be. It is important to learn how to put the pieces together, because that is where the huge wins reside, and sometimes some huge losses if the tide goes against you.

If you want to be the second type of investor, you need to develop three main skills.

  1. Find an opportunity that everyone else missed. You see with your mind what others miss with their eyes. For example, a friend bought this rundown old house. It was spooky to look at. Everyone wondered why he bought it. What he saw that we did not was that the house came with four extra empty lots. He discovered that after going to the title company. After buying the house, he tore the house down and sold the five lots to a builder for three times what he paid for the entire package. He made $75,000 for two months of work. It’s not a lot of money, but it sure beats minimum wage. And it’s not technically difficult.
  2. Raise money. The average person only goes to the bank. This second type of investor needs to know how to raise capital, and there are many ways that don’t require a bank. To get started, I learned how to buy houses without a bank. It was the learned skill
    of raising money, more than the houses themselves, that
    was priceless. All too often I hear people say, “The bank won’t lend me money,” or “I don’t have the money to buy it.” If you want to be a type-two investor, you need to learn how to do that which stops most people. In other words, a majority of people let their lack of money stop them from making a deal. If you can avoid that obstacle, you will be millions ahead of those who don’t learn those skills. There have been many times I have bought
    a house, a stock, or an apartment building without a penny in the bank. I once bought an apartment house for $1.2 million.
    I did what is called “tying it up,” with a written contract between seller and buyer. I then raised the $100,000 deposit, which bought me 90 days to raise the rest of the money. Why did I do it? Simply because I knew it was worth $2 million. I never raised the money. Instead, the person who put up the $100,000 gave me $50,000 for finding the deal, took over my position, and I walked away. Total working time: three days. Again, it’s what you know more than what you buy. Investing is not buying. It’s more a case of knowing.

3. Organize smart people.

Intelligent people are those who work with or hire a person who is more intelligent than they are. When you need advice, make sure you choose your advisor wisely.

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