[Podcast] Here’s where Robert Kiyosaki is wrong about property

Robert Kiyosaki has taught millions and millions of people some important financial concepts. 

I learned a lot from him in my early years, and I’ve quoted him on many occasions.

But I also believe that the way he thinks about real estate – which may work for him in the US – is not relevant in Australia. 

And there are a number of his other concepts that I don’t believe are correct.  

He does have some great basic rules of investing that I’m going to share with you on today’s podcast. 

I’m also going to share what I disagree with about his concepts.

Then you’ll have the information you need to make your own decisions.

Some of Robert’s basic rules:

Rule number 1: You should adjust your money mindset.

Rule number 2: Know what kind of income you’re working for. Earned income, portfolio income, or passive income?

Rule number 3: Convert ordinary income to passive income. Spend less than you earn, save it, invest it into an asset class that will give you investment income. This involves delayed gratification.

Rule number 4. The investor is the asset or the liability. Invest in your financial education first. Like that one.

Rule number 5: Learn to evaluate risk and reward. 

Rule number 6: Understand the cash flow quadrant.

Where I disagree with Robert:

Where I disagree with Robert is that he defines an asset is something that brings in cash flow, while I view capital growth as another form of income.

I believe you have to build a substantial asset base first, then convert that asset base to cash flow. 

The end game usually involves a number of different types of assets.

We don’t know what’s going to happen 10 years in the future, but we do know that if you have assets, you will have choices. 

Robert has done a great job of making sure people understand the importance of how money works.

But I’m concerned that he has scared off many investors and led others astray with his prophecies of Armageddon. 

He’s become a pessimist. I find no real substance behind his beliefs that the market is going to crash. 

Further, I feel that Australians are misled by investment advice that may work in America, but not in Australia. 

Real estate investments are not cash flow investments in Australia. 

In my mind, investment decisions should be based on the potential for capital growth.

Cash flow is important, but it’s not the end game.

Robert suggests that your home is not an asset.

I disagree with that. 

Robert is an ardent real estate investor.

He owns 3 homes and 8000 rental properties.

So clearly, he knows a lot about property – in the United States where the rules and tax regimes are very different.

Robert says that your home is not an asset, it’s a liability, because it doesn’t bring money in and you must spend money on it. 

But that’s not my definition of an asset and it’s not the standard definition of an asset either. I believe this assumption is flawed. 

Links and Resources: 

Michael Yardney

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Some of our favourite quotes from the show:

“The first step is to use leveraging gearing to buy high-growth assets.” – Michael Yardney

“If you’re focusing on cash flow as a goal, you’re not doing it right.” – Michael Yardney

“If a problem isn’t going to matter in ten months, don’t even spend ten minutes worrying about it.” –Michael Yardney

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