The REAL Bookof Real Estate
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The REAL Bookof Real EstateREAL EXPERTS. REAL STORIES. REAL LIFE.Robert Kiyosaki
Copyright 2009 by Robert T. KiyosakiPublished by Vanguard PressAll rights reserved. No part of this publication may be reproduced, stored in a retrievalsystem, or transmitted, in any form or by any means, electronic, mechanical, photocopying,recording, or otherwise, without the prior written permission of the publisher. Printed inthe United States of America. For information and inquiries, address Vanguard Books,387 Park Avenue South, 12th Floor, New York, NY 10016, or call (800) 343-4499.Designed by Anita KourySet in 10.5 point MercuryLibrary of Congress Cataloging-in-Publication DataThe real book of real estate : real experts, real advice, real success stories/Robert Kiyosaki.p. cm.Includes index.ISBN 978-1-59315-532-21. Real estate investment. 2. Real estate business. I. Kiyosaki, Robert T., 1947HD1382.5.R33 2009333.33—dc222009008346ISBN 13: 978-1-59315-532-2Vanguard Press books are available at special discounts for bulk purchases in the UnitedStates by corporations, institutions, and other organizations. For more information, pleasecontact the Special Markets Department at the Perseus Books Group, 2300 Chestnut Street,Suite 200, Philadelphia, PA 19103, or call (800) 810-4145, extension 5000, or email@example.com 9 8 7 6 5 4 3 2 1
"I'm not a genius. I'm just a tremendous bundle of experience."—Dr. R. Buckminster “Bucky” FullerFrom left to right: Dr. R. Buckminster“Bucky” Fuller at eighty-six years old withRobert Kiyosaki in 1981. Buckminster Fullerwas an American architect, author,designer, futurist, inventor, and visionary.Recognized as one of the mostaccomplished Americans in history, hededicated his life to a world that workedfor all things and all people.
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ContentsAcknowledgments ixIntroduction, Robert Kiyosaki 1PART 1: The Business of Real Estate1 The Business of Real Estate, Tom Wheelwright 52 A Real Estate Attorney’s View of Assembling and Managing YourTeam, Charles W. Lotzar 293 The Way to Exotic Wealth, Wayne Palmer 534 Proﬁts from the Ground Up, Ross McCallister 715 Master Your Universe, Craig Coppola 896 10 Rules for Real Estate Asset Protection, Garrett Sutton 1087 Of Marbles and Capital, Wayne Palmer 1338 How to Avoid and Handle Real Estate Disputes, Bernie Bays 152PART 2: Your Real Estate Project9 Buy by the Acre, Sell by the Foot: Understanding Real Needs,Financial Logic, and Asking Questions, Mel Shultz 17310 It’s All About Adding Value, Curtis Oakes 18411 Analyzing the Deal, or Adventures in Real Estate, John Finney 20012 Real Estate Due Diligence, Scott McPherson 22213 Creating Value from the Inside Out, Kim Dalton 23314 Financing for Real Estate Investors, Scott McPherson 25115 Lease It and Keep It Leased, Craig Coppola 26216 The Perils of Careless Property Management, Ken McElroy 276
PART 3: Creative Ways to Make Money in Real Estate17 Getting from A to B Without Paying Taxes, Gary Gorman 29318 No Down Payment, Carleton Sheets 30619 Marketing: Your Ticket to Finding and Proﬁting from Foreclosures,Dean Graziosi 32620 Entitlements: The Sleeping Giant of Real Estate Proﬁtability,W. Scott Schirmer 34121 The Tax Lien Investment Strategy, Tom Wheelwright 37122 Horse Trading: The Original Way to Wealth on the Great AmericanFrontier, Wayne Palmer 39023 How to Create Retail Magic: A Tale of Two Centers,Marty De Rito 409PART 4: Lessons Learned24 What One Property Can Teach You, Kim Kiyosaki 43325 In the Beginning . . . , Donald Trump 45126 What Is the Most Important Thing You’ve Learned From YourFather About Real Estate?, Donald Trump Jr. and Eric Trump 45827 Overcoming the Fear of Failing, Robert Kiyosaki 466Index 481Credits 501
AcknowledgmentsFor years I have been an advocate for ﬁnancial education. While many otherﬁnancial advisors are telling people what they should invest in, I have beentelling people to invest in themselves—to invest in their own knowledge. Thatis what I have done, and it has made me rich. I have also been telling people tosurround themselves with great teachers who are actively practicing what theypreach. The creation of this book was made possible because of the people Iconsider my teachers. Each one has a lifetime of experience and a lifetime ofknowledge. And each one knows the importance of continual learning.The contributors to this book generously gave of their time and their talentso that you could see the possibilities, avoid the pitfalls, and understand themethods of building wealth through real estate. They have recollected theirgreat achievements, and they have revealed their painful failures. I thank themfor their openness. The lessons we learn from our own mistakes and the mistakes of others are the most powerful.These people are not only my advisors, but they are also my friends. Togetherwe have been through the ups and downs of the real estate cycle, ridden eachwave, and made money doing it. These are the friends I run my ideas and mydeals by. And because they are friends, I know that they will give me theirhonest opinions. I thank them for that, too.ix
xACKNOWLEDGMENTSI’d also like to thank Jan Ayres and Kathy Heasley of Heasley & Partners,Inc., who took this book from ideas on a ﬂip chart to a ﬁnished manuscript.Special thanks to Rhonda Shenkiryk of The Rich Dad Company and CharlesMcStravick of Artichoke Design for their work on the book’s cover. Finally,thank you to my wife, Kim, who more than twenty years ago said yes to a guywith no money and a lot of ideas.
Introduction: A Note fromRobert KiyosakiWhy a Real Book of Real EstateThere are four reasons why I think a real book of real estate is important atthis time.First, there will always be a real estate market. In a civilized world, a roofover your head is as essential as food, clothing, energy, and water. Real estateinvestors are essential to keeping this vital human need available at a reasonableprice. In countries where investing in real estate is limited or excessively controlled by the government, such as it was in former Communist Bloc countries,people suffer, and real estate deteriorates.Second, there are many different ways a person can participate and prosperwith real estate. For most people, their only real estate investment is where theylive. Their home is their biggest investment. During the real estate boom from2000 to 2007, many amateurs got involved with ﬂipping houses—buying lowand hoping to sell higher. As you know, many ﬂippers ﬂopped and lost everything. In true investor vocabulary, ﬂipping is known as speculating or trading.Some people call it gambling. While ﬂipping is one method of investing, thereare many, more sophisticated, less risky ways to do well with real estate. Thisbook is ﬁlled with the knowledge and experiences of real, real estate investors—real estate professionals who invest rather than ﬂip, speculate, trade, or gamble.Third, real estate gives you control over your investments, that is, if youhave the skills. In the volatile times of early 2009, millions of people were losing1
2THE REAL BOOK OF REAL ESTATEtrillions of dollars simply because they handed over control of their wealth toother people. Even since the middle of 2008, the great Warren Buffett’s fund,Berkshire Hathaway, has lost 40 percent of its value! Millions of people havelost their jobs, which means they had no control over their own employmenteither. The real, real estate professionals in this book have control over boththeir businesses and investments. They will share their good times and the badtimes with you. They will share what they have learned while learning to controltheir investments and their ﬁnancial destiny. The learning process is continual.And, ﬁnally, here’s my real reason for this book. I am sick and tired of ﬁnancial experts giving advice on real estate, especially when they do not actuallyinvest in real estate. After my book Rich Dad Poor Dad came out, I was on a television program with a ﬁnancial author and television personality. At the time,in 1999, the stock market was red hot with the dot-com boom. This ﬁnancialexpert, who was a former stockbroker and ﬁnancial planner, was singing thepraises of stocks and mutual funds. After the stock market crashed in 2001, thisman suddenly resurfaced with a new book on real estate, portraying himself asa real estate expert. His real estate advice was beyond bad. It was dangerous.Then the real estate market crashed and he dropped out of sight again. The lasttime I saw him, he had written a book on investing in solar energy and wasclaiming to be a green entrepreneur. If he were to write a book about what hereally does, his new book would be about raising bulls . . . and selling BS.There are other ﬁnancial “experts” who know nothing about real estate, yetthey speak badly about real estate and say it is risky. The only reason real estateis risky for them is because they know nothing about investing in it. Instead,they recommend saving money and investing in a well-diversiﬁed portfolio ofmutual funds—investments which I believe are the riskiest investments in theworld, especially in this market. Why do they recommend investing in savingsand mutual funds? The answer is obvious: Many of these professionals are endorsed by banks, mutual fund companies, and the media. It’s good business toplug your sponsors’ businesses and products.Commissioning this book gives the public its ﬁrst chance to learn from real,real estate investors, friends, and advisors—people who have been through theups and the downs and who walk their talk. This book gives them the opportunity to share the spotlight with the many media ﬁnancial “experts” and speakthe truth. These real estate experts are true pros, and you’re about to move beyond the media hype. I hope you are ready. The Real Book of Real Estate is thereal deal.
TOM WHEELWRIGHT CHARLES LOTZAR WAYNE PALMER ROSS MCCALLISTER CRAIG COPPOLA GARRETT SUTTON BERNIE BAYSPART 1The Businessof Real Estate
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Tom WHEELWRIGHT1The Business of Real EstateTom Wheelwright is a rare combination of CPA, real estate investor, andteacher. He has the ability to take the complex and often boring subject oftax and tax law and make it into something that’s simple enough for a person likeme to understand.Tom understands the tax code. He actually enjoys reading the tax code, and because he is such a student of it, he understands this lengthy document better thananyone I know. Most CPAs focus on a very small part of the tax code. They focuson the part that lets you and most Americans defer taxes until retirement—thecode relating to IRAs, 401(k)s, and other so-called retirement plans. Tom also paysclose attention to the other, much lengthier part of the code that shows you how toreduce or eliminate your taxes permanently. The difference between Tom andother CPAs is that Tom understands the purpose of the tax code. It’s not just a setof rules. It’s a document that when followed is designed to reward certain behaviorsthrough lowering or eliminating taxes. Does your CPA see the tax code this way?I consider Tom to be a very moral and ethical man. He is very religious, raisedin the Mormon faith. While I am not Mormon, I do share many of the values ofthe Mormon religion—values such as tithing, giving at least 10 percent to spiritualmatters, and dedicating a number of years as a missionary. While I have never5
THE REAL BOOK OF REAL ESTATE6been a religious missionary, I have spent nearly ten years as a military missionary:a Marine Corps pilot in Vietnam, serving my country.One important lesson I have learned from Tom and others of the Mormon faithis the saying, “God does not need to receive, but humans need to give.” This remindsme of the importance of being generous. It is my opinion that greed rather thangenerosity has taken over the world. Every time I meet someone who is short ofmoney, or if I am short of money, I am reminded to be generous and to give what Iwould like to get. For example, if I want money, I need to give money. Havingbeen out of money a number of times in my life, I have had to remind myself togive money at times when I needed money the most. Today I make a point of donating regularly to charities and causes that are dear to my heart. My opinion is,if I cannot personally work at a cause near to my heart, then my money needs towork there for me. Going further, if I want kindness, then I need to give morekindness. If I want a smile, then I need to ﬁrst give a smile. And if I want a punchin the mouth, then all I have to do is throw the ﬁrst one.I asked my friend Tom Wheelwright to be a part of this book not only becausehe is a smart accountant—a team player that anyone who wants to be rich needsto add to his his team—but also because he comes from a generous and soundphilosophical background.Tom is a smart CPA who is an advocate of investing in real estate. Why? Because he knows that tax laws reward real estate investors more than they rewardstock investors. He is a great teacher, a generous man, and, most importantly, afriend I respect.—Robert KiyosakiIwas one of the fortunate few growing up. Unlike much of the rest of theworld—people who have been told to save their pennies and invest in mutualfunds—my parents taught me to invest in real estate and business. My fatherhad a printing business, and my mother handled their real estate portfolio.So, it was natural that once I had received my education, both formal andwork related, I opened my own business. (I had a lot of education before Iﬁnally opened my own business—a master’s degree in professional accounting,thirteen years of experience with international accounting ﬁrms, as well as experience as the in-house tax advisor to a Fortune 1000 company. I was a littleslow to realize the power of bu
Robert Kiyosaki in 1981. Buckminster Fuller was an American architect, author, designer, futurist, inventor, and visionary. Recognized as one of the most accomplished Americans in history, he dedicated his life to a world that worked for all things and all people. 9781593155322_FM:real estate_new 3/25/09 3:52