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By Michael Yardney

Why I don’t agree with Robert Kiyosaki

During your career as an investor, you’ll no doubt read at least a few books from various experts who’ve all created wealth through a proactive property investment strategy.

One of the names you’ve probably come across is Robert Kiyosaki, celebrated author of the Rich Dad, Poor Dad series that’s inspired and assisted many an investor on the road to their own success.

I’ve quoted Robert on more than one occasion, and hold him in high regard for all he’s achieved.

In fact I've interviewed him a couple of times - you can watch one interview with Robert Kiyosaki here.

And not surprisingly almost all the dire predictions he made did not eventuate.

Also... I don't agree with all of his theories on investment either.

And there’s one, in particular, I find somewhat misleading, which is...

Home Ownership

Robert Kiyosaki suggests that your home is not an asset

Now I agree with Kiyosaki that most people don't know the difference between assets and liabilities, but in general, for many Australians, their home is their biggest asset.

Robert Kiyosaki says your home is not an asset as there is no income coming in, only expenses going out and therefore your home is a liability, not an asset.

Now if you accept his definition of an asset as being something that brings in cash flow, then he is correct.

However, the common definition of an asset has nothing to do with cash flow.

The fact that Robert invests in gold and silver, suggests he believes they are an asset, however, they don’t bring any cash in do they?

I believe that if I had $1 million in my bank account, that would be an asset, even though it would hardly bring any cash into my pocket.

And I believe if I took it out of the bank and put it under my mattress, that $ 1 million would still remain an asset, even with no cash flow.

This means Kiyosaki's basic assumption that your home is not an asset is flawed.

How I see it is that the way you get income from your investment properties is in 4 ways:

  • Capital growth
  • Rental returns
  • Tax benefits
  • Accelerated/manufactured growth

Unfortunately, too many people look for cash flow from their residential real estate investments in Australia and that’s just not how it works.

In Australia, residential real estate is a high-growth relatively low-yield investment and to try and make it something different just tarnishes it and the results don’t allow you to build a substantial asset base to give you a cash machine in the future.

Your home as a stepping-stone

In the current low-interest-rate environment with the cost of mortgages so cheap, present-day homeowners are actually sitting on a potential goldmine.

Far from being a drain on the household coffers, many of us are taking the opportunity to reduce our mortgages and property loans faster, contributing extra to our continually shrinking monthly repayments.

In turn, some property owners are building up equity at a considerable rate, with the help of incredibly buoyant markets around Australia.

In fact, with double-digit capital growth in many of our big cities this year, many people will earn more from the appreciation of the value of their home and they will earn from the day job.

Your home is an asset with zero tax liability if you choose to sell it.

But better than that, it could represent the leaping-off point to hasten your climb up the property ladder.

Take most of Sydney property markets for instance, in fact almost all our capital city market, where homeowners have enjoyed significant, double-digit growth on their principal place of residence (PPOR) over the last year so far without lifting a finger.

Some of them are leveraging the hundreds of thousands of dollars worth of equity they’re literally sitting on (or in) to invest in further high-growth assets.

Now more than ever, your home can and should be an integral part of your investment game plan.

Home Ownership 2

Homeowners rejoice!

It’s no secret that housing affordability is an ongoing issue for those attempting to break into Australia’s more popular inner-urban property markets.

First-home buyers are being priced out of the running, with things only expected to get worse for today’s young tenants who want the convenience and commutability of city living, but just can’t afford the ever-climbing house prices.

Many will no doubt become stuck on the rental roundabout, while some are choosing to rentvest - remain as tenants where they want to live and invest in real estate further afield, where they can afford the more reasonably priced outer fringe suburbs.

For those of us fortunate enough to have acquired a well-positioned property in the past, even by chance in the form of our own home, now is the time to rejoice!

For you are sitting on an investment goldmine beyond compare!

About Michael Yardney Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.

Michael, If I had internet back then and you had been putting forward these blog posts, I would have owned a whole street by now. I was 19 when I read Rich dad and indeed had the same quandry over why he carried on about "your home" not being an ass ...Read full version

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If you buy a house that is more expensive than you need this can become big liability and take away money from other income generating purposes. So not every house is an asset. Hence why i tend to agree with Robert kiyosaki

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how can you stop an agent 'buying 'your listing. I recently put a property in advices high one mil so paid advertising as advised first offer and subsequent were 1500000 I get a decent rental return on that and could have saved the 35000 in add c ...Read full version

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