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OFF-TOPIC The Kiyosaki Crash

Discussion in 'Off Topic: Sports, Funnies, Pop-Culture' started by imirza, Oct 14, 2007.

  1. imirza
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    imirza Contributor

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    They should call the current real estate slowdown across the nation the 'Kiyosaki crash' :)

    I'm sure a whole lot of people who speculated in real estate over the last few years were in some ways influenced by RK and other RE gurus. While RK never encouraged people to speculate on RE, he has suggested investing in RE is one of the best tools to get out of the rat race. The RE market really took of around 2003, around the time RK was gaining national recoginition. Coincidence ? :smxF:

    Hottest RE market in 2005: Phoenix, right in RKs backyard :coolgleamA:
     
  2. lucas
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    lucas New Contributor

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    He's an easy scapegoat, but doesn't it make more sense to say that the bubble in housing came from the easy credit available when interest rates were lowered to 1% and kept there for several years following the dot-com crash in 2000/2001? Makes more sense to me than to say the housing run-up occurred because of a few books of Kiyosaki's that made it to the bestseller list. Otherwise we could look at the rest of the bestseller list and say, why isn't there a boom in chicken soup?

    Besides, what Kiyosaki teaches is correct. RE _is_ one of the best investment vehicles available, because (1) the leverage is so high in that you can often use 90% other people's money or more to build your wealth, and (2) the laws and tax code provide so many advantages to real estate (like tax-free capital gains for primary residences, 1031 exchanges, etc etc).
     
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  3. AroundTheWorld
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    AroundTheWorld Be in the Moment Speedway Pass

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    RK certainly talks about real estate as a great investment tool - but he also DEFINATELY talks about CASHFLOW....

    He may have inspired people into REI - but it is their own lack of knowledge that led to irresponsible investments. That had nothing to do with RK.

    In fact - RK warned about the crash before it happened - and no one (main stream media, etc.) listened to him. He warned people to stop flipping. He told people "a good investment is one that will do well when the market goes up AND when the market goes down" ie. cashflow.
     
  4. yveskleinsky
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    yveskleinsky Bronze Contributor Speedway Pass

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    I second what Around the World said- Kiyosaki is all about CF and not speculating. As for the market correction- I wouldn't say it is a crash- most of these people losing homes bought them as their primary residence and then their loan adjusted. I'm sure that many flippers lost a lot as well, but that's what happens when you gamble. ...and that can happen just as easily in a good market as in a bad!
     
  5. Russ H
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    Russ H Gold Contributor Read Millionaire Fastlane Speedway Pass

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    Yup. RK's approach showed how to make money when there *is* a crash.

    Or at any time, really.

    He shows you how to make even more when you can buy properties in a downturn.

    Hey, that's where we are now! :banana:

    But for the "victims" out there who always have to blame someone else for their problems, you're right: RK may be a convenient scapegoat.

    But only if you didn't really follow what he was teaching.

    -Russ H.
     
  6. Nate
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    Nate New Contributor Read Millionaire Fastlane

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    When you refer to "cashflow" are you referring to owning properties that bring in a monthly revenue? ie. renting a house or office space? That is the only one I can think of. Thanks.
     
  7. Russ H
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    Russ H Gold Contributor Read Millionaire Fastlane Speedway Pass

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    Nate-

    When we refer to a prop that "cashflows", we mean you put your money down, collect your rents/lease payments, pay off ALL of your expenses (incl one-time big fix-it expenses), and, even with a vacancy rate more than zero, you still get cash in your pocket every month.

    Note that this is not always easy, and, without 30-50% down, it's flat out impossible in some RE markets.

    But that's why RK says you need to learn how to do this-- b/c as long as you can buy REIs that do this, you can weather downturns, etc-- and continue to buy more and more and more RE-- since all of it PAYS FOR ITSELF. :)

    -Russ H.
     
  8. KyJoe
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    I think more people are blaming Greenspan than RK.
     
  9. Z5 FILMS
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    Z5 FILMS Contributor

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    He makes money selling books. I would not put much effort into his real estate advice. I have never seen any proof he ever made $1.00 in real estate. If you want to learn how to market yourself and sell books, he's the man to go to. For real estate advice, I would run the other way for the same reason I don't go to the dentist to help advise me on depression.
     
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  10. Russ H
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    Russ H Gold Contributor Read Millionaire Fastlane Speedway Pass

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    Z5-

    Are you talking about RK?

    Have you not done your due diligence? Have you not found the hundreds of units he and Kim own?

    At least look at the posts of Glen Fullmer on RD. He's done *way* more background research than anyone else I know re RK.

    I can't believe anyone (except John T Reed) would make such misinformed comments re RK.

    Sheesh, do your homework. That's what due diligence is.

    I just realized I should do my own dd. So I read a couple of your past posts:

    Why make such stupid comments about RK's RE holdings if you don't know anything about REI or dd, Z5?

    You just show your ignorance, and mislead others.

    -Russ H.
     
  11. nomadjanet
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    nomadjanet Contributor

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    Most true failure is caused from lack of personal responsibility. I am not talking about temporary setback, those happen to everyone. It’s how you react to a temporary setback that makes you a failure or a success. People are sentient beings; they have decision making capabilities, if they choose not to make decisions, that is also a decision.
    Everyone’s mom told them, If your friends jump off a cliff, will you follow?
    The same applies to getting into things without due diligence and getting in over your head in debt to the point that you can’t control your business.
    Janet
     
    Last edited: Oct 15, 2007
  12. ProInvestor
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    ProInvestor New Contributor

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    While I think Kiyosaki would be 'chuffed' to think that he can move markets I doubt he is really to blame for the subprime mess. Mainly it was the fact that those buying the debt (hedge funds) didn't do their due diligence and got burnt as a result.

    "I have never seen any proof he ever made $1.00 in real estate."
    He apparently owns close to 1,000 units. And here is a project he owns (or owns a large % of): http://www.bellavitaofscottsdale.com/ It contains close to 300 apartments.

    Rgds.
    ProInvestor
     
  13. hakrjak
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    hakrjak Bronze Contributor Read Millionaire Fastlane

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    I don't think you can blame the crash on lenders... I mean, are you saying that if we didn't have lenders making loans easily available that we'd still be seeing 25% yearly returns on real estate in this country? Doubtful....

    Just like most crashes, I'd say you can blame greedy stupid amateurs, who get involved and always bring down the house.

    One of my best friends who is a bond trader on Wall Street has always told me -- When Joe Sixpack jumps into a hot market, that's when the experienced investors jump right out. They know that as soon as your average joe jumps in with zero knowledge, things are about to go south really fast.

    - Hakrjak
     
  14. Nate
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    Nate New Contributor Read Millionaire Fastlane

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    Thanks for your reply to me Russ. That all makes sense except for I didn't understand the part about, "even when you have a vacancy rate of more than zero, you can still make money". Wait, I think it just clicked. You are basically saying even if you don't fill all the units, you can be ok? At first I was thinking you meant that you can have zero people in your units... which didn't make any sense to me.
     
  15. Bilgefisher
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    Bilgefisher Bronze Contributor Read Millionaire Fastlane

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    I think its a two way street. Home buyers that didn't do their research and lenders that got over zealous. Many lenders are finding themselves in trouble because they loaned to people that had no business getting a loan. When those people inevitable defaulted, it came back to hurt the lenders. A little bit of greed and poor planning on both sides. I think NomadJanet hit this one on the nose.
     
  16. ProInvestor
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    ProInvestor New Contributor

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    Just like most crashes, I'd say you can blame greedy stupid amateurs, who get involved and always bring down the house.
    One of my best friends who is a bond trader on Wall Street has always told me -- When Joe Sixpack jumps into a hot market, that's when the experienced investors jump right out. They know that as soon as your average joe jumps in with zero knowledge, things are about to go south really fast.

    ---

    No offense... but Wall Street / Hedge Funds are supposed to be the sophisticated investors! (Why the big bonuses if not for the 'better' performance???).

    Really my mind boggles when you see lender lending 7% ARMs that jump to 14% to people who couldn't really afford these type of loans in the first place...
    Didn't the lenders that lent the money think about what could happen???
    Didn't the billion dollar hedge funds think about the lending standards???

    While there were speculators (mainly helped thanks to ignoring lending standards) there are just as many regular people who wanted to believed that they could establish a history (while paying 7%) before the loan would go back to the default rate.

    100% Wall Street's fault for creating and then encouraging (thanks to perverse economic incentives) the conditions for this crises....

    And ironically the small/mid level investor (who owns say 7+ houses) still has trouble getting a mortgage, even though they might have perfect credit..... Work that one out...

    Rgds.
    ProInvestor
     
  17. Russ H
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    Russ H Gold Contributor Read Millionaire Fastlane Speedway Pass

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    So now the mortgage crisis can be blamed 100% on Wall Street?

    Not the idiots who signed on the dotted lines and are now crying "victim"?

    Not on the sub-prime lenders who floated these questionable loans in the first place?

    Thanks for the chuckle, ProInvestor. I needed that. :)

    -Russ H.
     
  18. AroundTheWorld
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    AroundTheWorld Be in the Moment Speedway Pass

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    Actually... looking for "anyone" to blame is funny....

    As if market cycles don't happen.

    Markets go up.
    Markets go down.
    It is the nature of markets.

    Take that into your knowledge base - figure out what you are going to do about it - and realize that NO ONE is to blame. Sure there are contributing factors and sure there are interconnected relationships but come on guys... no one is to blame here.
     
  19. Russ H
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    Russ H Gold Contributor Read Millionaire Fastlane Speedway Pass

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    Funny how seeking who to blame has become an American pastime.

    Sad, actually.

    All part of the sense of entitlement/victim mentality you see on TV these days.

    I don't think it was always that way, but I'm not old enough to know.

    -Russ H.
     
  20. Russ H
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    Russ H Gold Contributor Read Millionaire Fastlane Speedway Pass

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    Yup. You need to factor in a vacancy rate. Some folks use 5%, others 15%.

    It depends in part on your area, and how many units you have.

    Let's say you have a duplex. Someone moves out and it takes you 3.5 weeks to fix the place up and another 4.5 to rent it.

    If you had both units rented all year long, that would be 0% vacancy rate.

    With just this one unit vacant for 8 weeks (2 months), you have:

    # of months w/non-rented units ÷ # of units x 12 months = 2/24 = 8.33% vacancy rate.

    It's no wonder why guys like SteveO can turn an apt in under a week (3 days to fix up, plus they have waiting lists for people who want to move in).

    That, and if you have an apt building w/100 units, your potential vacancy rate *can* be very, very low, if you manage it well.

    Right SteveO? ;)

    (I learned all of this from Steve)

    -Russ H.
     
  21. JesseO
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    JesseO Contributor

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    Russ, you're exactly right on this one. If then unit is left in good condition, it should take 1-3 days to get it ready. Really bad places can take up to 2 weeks...and with that number I'm figuring you'd need to gut the unit with a 90% rehab or so. I don't see any unit being vacant for 2 months unless there was a major fire or other extreme circumstance.
     
  22. Russ H
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    Russ H Gold Contributor Read Millionaire Fastlane Speedway Pass

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    And we're not talking environmentally friendly green, either.

    -Russ H.
     
  23. MJ DeMarco
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    MJ DeMarco Raving Lunatic Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    Admin Post
    This is called "dumb money shows up at the end of the cycle"

    I understand what Z5 is saying. If you dissected his net worth, you'd find most of it came from selling books and the upsells of the CF Corp, not real estate. Id speculate 75%-90%.
     
  24. nomadjanet
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    nomadjanet Contributor

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    I have never looked at RK net worth but what you say makes sense. It also makes sense that he used his income stream from real estate as a base to support his lifestyle and to write the books from. It all seems like good business practice to me.
     
  25. Russ H
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    Russ H Gold Contributor Read Millionaire Fastlane Speedway Pass

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    MJ-

    One of RD's strategies is to develop a business that throws off excess cash.

    Next, you take this cash and leverage it into RE and other investments, primarily using OPM.

    You structure the deals so that EACH AND EVERY ONE HAS POSITIVE CASHFLOW.

    Meaning if, after all expenses, you can't put some money in your pocket at the end of each month, you don't do the deal. Period.

    Leverage can be done in any endeavor, but RK (and Diane Kennedy) point out that RE is one of the few places where the US govt actually lends you a hand. Lots of tax advantages. Even govt grants in some cases!

    Using RD's strategies, we've actually done this: Bought a B&B that generates hundreds of thousands of $$, which we have leveraged into buying more RE that cashflows even more (or, in the case of our one big project, is sucking up cash right now, but will generate over $800K/yr once it's up and running, and will be worth in excess of $4M).

    MJ, I realize you probably already know ALL of this stuff. But others reading this thread, unfamiliar w/RK and RD, may not.

    No doubt RK has pulled in HUGE amounts of money from his RD business. Generating lots of cash (via RD) is integral to his overall plan. He just uses that to buy cashflowing RE. Again, part of the whole plan.

    Here is Z5FILMS entire quote:

    Cute. Witty.

    And just plain wrong, in so many ways.

    Z5 hasn't even done the smallest amount of due dilegence (if he had, he would know that RK owns lots of RE, and makes lots of money from it).

    So we start with Z5's lack of information, and add to it an appalling lack of respect.

    I realize it's fashionable (esp on the RD site) to trash RK, and accuse him of all sorts of things. This started long ago by guys like Chessy who made all sorts of false accusations and wanted RK to defend himself online.

    Over time, more and more people are doing this. The RD mods just let the crap pile up.

    Do that for long enough, and you have one stinkin' huge pile of crap.

    I'd rather that not happen here.

    So I pointed out that I think Z5's post is a load of crap.

    I stand by that.

    If he wants to make more posts like this, I'll keep doing it.

    I'd prefer that on the fastlane forums, we all conduct ourselves with a modicum of respect for others. And that we not ridicule or belittle others-- especially those we don't know!

    I realize that the concept of showing respect is very radical and counter-current to what passes for acceptable behavior on the internet these days.

    But I think we actually have that level of respect for others here, already, on the fastlane forums.

    And I don't want to lose it.

    Hope this makes sense. :)

    -Russ H.
     
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