My special guest today is Robert Kiyosaki author of the best-selling book Rich Dad, Poor Dad.
When Robert’s team reached out to me and asked me if I’d like to have him as a guest, I jumped at the opportunity, because I heard that he’s got a message that he wanted to share with Australians about the challenges for our economy ahead, and the opportunities on the other side of the downturn.
Now, I don’t agree with everything he has to say, but I respect that he’s taught millions of people about the basics of financial literacy, so I was keen to hear his opinions.
You’re going to enjoy the conversation as we talk a bit about his basic financial concepts before we get into deeper topics.
Although I don’t agree with everything Robert says, I thought I’d give him the courtesy of the airtime he deserves, then after my chat with him, I’m going to share my views.
So, be sure to listen to both sides of the discussion, and then you’ll be able to use that to inform your own views.
Topics that Robert and I discussed:
- Why so few people are becoming financially independent
- Robert’s advice to people taking on too much debt
- The shadow banking system
- The Cashflow Quadrant
- What’s ahead for the average Australian’s financial future
- How bad Robert thinks the crisis is going to get
- Whether Robert’s predictions have become more pessimistic over time
- The upside Robert sees on the other end
- Factors other than resilience that it takes to be a successful entrepreneur
- Whether today’s technologies make it easier to get started in business
- What Robert thinks will happen to house prices in the capital cities
- Robert’s thoughts about superannuation
- What it was like dealing with Donald Trump before he was president
Michael’s Thoughts on Robert’s Interview
Clearly Robert knows a bit about real estate in the United States, where the rules are very different, where the tax regimes are very different, where the markets are very different, where the way you invest is very different.
In previous podcasts, I’ve explained why Australian real estate is different from overseas, but many overseas gurus just don’t get it.
In Australia, property markets are underpinned by the fact that 70% of properties are owned by homeowners, and half of them don’t even have a mortgage against their properties.
Of the other half, many are well ahead in their payments, while others are using their mortgage to support the purchase of investment properties that bring cash in.
This is very different to overseas.
Australia really doesn’t have a debt problem – at least, not when it comes to real estate assets.
Robert also suggests that your home is not an asset – meaning that it doesn’t bring money in, only expenses going out, so it’s a liability.
And if you accept his definition of an asset, he’s right.
But that’s not my definition of an asset. It’s also not the common definition of an asset.
I believe a million dollars is an asset if you have it sitting in a bank, or even if you take it out and put it under your mattress.
It’s an asset even with no cashflow.
Robert is a cashflow investor, and that’s what’s appropriate for the tax rules and the system in the United States, but it has not made people wealthy in Australia.
There are four ways to make money on residential real estate in Australia:
- capital growth,
- rental return,
- tax benefits, and
- manufacturing growth through renovation and development.
The most important of those is tax-free capital growth.
Unfortunately, too many people look for cashflow from their residential real estate investment, and that’s just not how it works in Australia.
Similarly, Robert’s concerns about our superannuation funds not being fully funded are just not accurate.
The average superannuation fund that you and I are part of are fully funded.
There’s no doubt that Australia’s economy, and that of most countries in the world, will experience a recession.
But currently, a combination of monetary and fiscal policies should see us start to rebound in the third or fourth quarter of this year.
Robert an innovative thinker and an expert in personal finance, but he’s not an economist.
We have some very astute economists employed by our banks, by the Reserve Bank of Australia, by the International Monetary Fund, and they all see a difficult six months ahead, but nowhere near as negative as the naysayers grabbing headlines at the moment.
Links and Resources:
Some of our favourite quotes from the show:
“I wouldn’t invest the way the way I invest in Australia in New Zealand, where the rules are very different, or in the United States.” – Michael Yardney
“I’m not suggesting that there’s a bubble in Australia, and I think those who think there are, are probably wrong.” – Michael Yardney
“In Australia, residential real estate’s a high-growth, relatively low-yield investment, and to try and make it something different just bastardizes it.” – Michael Yardney
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