Solid Advice For Property Investors

Robert Kiyosaki, Author of the “Cash Flow Quadrant” book, says his “Rich Dad” asserts that investing in real estate is not rocket science. He suggested it was just an issue of using sound judgment. But it’s common knowledge that reasoning is not, in fact, terribly typical.

According to Kiyosaki, the ”worst” investors are individuals who simply have not studied the things that produce positive results. They assume that investing in real estate is either too much of a risk or a rip off. Others leap before they look and end up suffering a loss.

The smarted opinion anyone can have having to do with investing is just to educate yourself. If, in your haste to “get rich”, you start investing without an education, you’ll be doing yourself a tragic disservice. Time is your most valuable resource and if you squander it, you’ll often find that the money will be lost as well - money you have in hand that you end up losing, money you could have earned if you’d just taken the time to figure out the techniques of successful investors.

“That is great,” you might say. You presumably will agree that studying good information is always a smart thing. After all, information is power. But “what training do I need?” might be your biggest question. Your second is probably going to be, “Where do I get it?”

The first thing you can do is study some essential accounting, which is not as ambiguous as it sounds. Accounting is the lexicon of business. If you’re going to invest in a company or a piece of property or what have you, you’ll want to be able to check in on it and see if it’ll be an asset (make you money) or a burden (lose your money). It sounds like logic when you think about it, doesn't it? But if you want to be able to ascertain those things, you’ll want to be able to read your accounting-statements.

There are 4 basic kinds of financial statements: cash flow statements, income statements, balance sheets, and statements of changes in share-holder equity. The last is pretty self-explanatory, and deals with the difference between at 2 different points in time. A shareholder’s equity is the net worth of a company, or it’s total assets minus its expenditures.

A “cash flow statement” is a document that specifies the cash used in making a company function properly, plus where the money originated. Wikipedia equates a corporation to a very big container of water that captures more of the water and has lines running out of it - into the pockets of the investors and others to whom the company is in debt. The cash flow statement aspires to explain the activity of the water – or in other words the flow of the cash.

The income (or P&L statement) keeps track of a company's income and losses due to expenditures over a period of time, as a balance sheet provides a description the same thing for one particular window of time and presents your liabilities and assets.

It all seems very straight-forward until you think about Kiyosaki's advice on telling your assets and your liabilities apart. He says that the lending institution, for example, will declare your home as an asset. It seems rational. After all, it is something you own, right? Yet according to Kiyosaki's rich dad's definition of liabilities and assets, your house is generally a liability. It is considered a liability because it will eventually cost you money in payments and repairs. It undoubtedly isn't earning money for you, and up to the time it starts doing that (say, you change residence and are able to charge enough rent to make a profit), then it is not an asset.

The bank isn’t actually lying to you outright. A house is an asset on their balance sheet because it is making money for THEM.

That’s the kind of thing you can decide for yourself and ascertain whether you are losing or making money on an investment property, if you make the time to educate yourself education. Don’t forget: Knowledge is POWER.

Article Source: http://www.aword2thewise.com

Alex Anderson Connect Buyers With MN Homes For Sale Or Minnesota Investment Property. Download A Free Copy Of "The Investors' Rental Guide" At www.GreatInvestmentProperty.com

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