Investing takes the right mindset. You need to be okay with the concept of risk and reward, as well as opportunity and loss. More importantly though, you need to develop a mindset rooted in analytical decision-making—specifically when it comes to money. Being able to look beyond dollars and cents, to the financial decisions you’re making and the payoffs that come with them, is critical.
If you're a real estate investor, you need to read Rich Dad, Poor Dad, by Robert Kiyosaki.
There are a lot of books about investing in real estate. But, in our opinion, none of them helped us as much as reading Rich Dad, Poor Dad. The book doesn’t give any techniques, tactics or direct advice on how to invest in real estate. What it teaches, is the mindset you need to succeed in real estate investing.
Here’s an example
I recently went to see an advisor about purchasing some stocks and mutual funds. When I was at their office, they showed me an Andex chart. An Andex chart basically shows you the cost of things over time and what it works out to be over the span of several decades. It’s a long-term look at appreciation.
On the chart, my advisor showed me if I would’ve invested in real estate in 1950 and spent $10,000, what it would be worth today. Then, he showed me what that same $10,000 investment in stocks from 1950 would be worth today. The stocks had a much higher value! Looking at the chart, it was a clear no-brainer. Even with the occasional stock market crash or recession, stocks still shot up the chart at a much faster pace than real estate.
So, I walked away thinking it was better to invest in stocks as opposed to real estate, based on what this Andex chart was telling me. The numbers don’t lie, right?
But then thought about Rich Dad, Poor Dad. I started to think beyond the numbers and instead, focus on the decision-making behind them.
Mindset is everything
Rich Dad, Poor Dad teaches you one simple philosophy: Mindset is everything. It shows you the best way to create a mindset about investing and dealing with money is having passive money work for you.
So, I took the knowledge I learned from Rich Dad, Poor Dad and re-analyzed the Andex chart at home. What I discovered was just the opposite of what I previously thought at first glance. No, you don't spend $10,000 on real estate in 1950 to have a be worth X today. You could have easily only spent $500 on real estate and had it come out to the exact same value. To understand why, you need to look at the way passive money and leverage work.
In real estate investing, you borrow most of the money you use to purchase real estate. And, when you borrow it creates leverage. Rich Dad, Poor Dad teaches you about the mindset for understanding leverage—about having money work for you, instead of working for your money.
Using knowledge I learned from Rich Dad, Poor Dad, I quickly discovered investing in real estate is actually much better. I can take the number they're showing me on the Andex chart and multiply it for the house purchase price and the house investments, because you invest a lot less money upfront than you would if it were stocks and securities.
If you’re going to read one book…
Based on this example—and dozens more like it I’ve come across during my investment career—we firmly believe real estate is one of the best investments you can make. And, if you’re going to read one book, make it Rich Dad, Poor Dad.
Rich Dad, Poor Dad absolutely gave us the mindset we need to invest with and be successful. We took that book and its philosophy, and we analyzed it up against the Andex chart to get real insights—not just out-of-context numbers.
Everybody should read Rich Dad, Poor Dad if they’re planning on getting involved in real estate investing—or any investing for that matter! It doesn’t teach you special tactics or tricks for investing. Instead, it gives you something so much more valuable: A mindset you can apply to any business situation or investment opportunity you come across in your investing career.
A note about diversification
Just like context was important in my Andex chart example, it’s also important for real estate investors reading this article. Real estate is a proven investment that has natural appreciation and exceptional potential. We believe it’s the best possible investment you can make.
Now, this isn’t to say you shouldn’t invest in stocks. Personally, I don’t—but that’s because I’m focused on a diversified real estate portfolio. If you’re a specialist or focused on a certain aspect of the real estate market, diversifying your portfolio with securities is a great idea.
Diversification is the number one way to protect yourself against downturn and hedge your investments.
Before you park your wealth in an investment vehicle, give Rich Dad, Poor Dad a read. One of the best things about the book is that it’s a quick read. You can get through it in about a week if you’re not an avid reader—quicker if you’re the type of person who loves to read! And, once you’ve read it, you’ll look at every investment opportunity and business decision with a whole-new mindset.
This article is not sponsored by Robert Kiyosaki or The Rich Dad company. The author has not received any compensation or special treatment to publish this content. The views expressed within the text are those solely of the author.
Below are a few links to make it easy for you to get into the investing mindset. If you have questions, please contact Canadian Real Estate Network!