Now, this is the type of books that Robert Kiyosaki would term as " How-To books". In it , you will have all the tax forms ( for the US citizens) and the tax rates illustarted for active, portfolio and active income.
Striking features of this book :
(1) The LSRR ( Laser ) formula
Liquidity, Safety , Rate of Return
(2) Extracting Equity from your house to Increase Asset base
Here is how it works. Assuming you have $100,000 in cash. Your asset is S100,000, you net worth is $100,000. Now by buying a house with 100% financing, you now have an asset base of $200,000 ( $100,000 cash plus $100,000 house) but your net worth remains the same, $100,000 ( because Asset, $200,000 minus Liabililties of $100,000 mortgage) . The reward is when your Assets grow by 10% ( say $100,000 put into paper investments and made 10%, and your house appreciates by 10%). Here, you borrow fom the bank to increase your asset base. However, note that mortgage interest is the cost of borrowing. If your house is not appreciating at a rate higher than your mortgage rate, then you will be in trouble. Generally, tenants will help reduce the borrowing cost. Do a thorough study between borrowing costs, and rates of returns ( appreciation, tenants rent) before attempting this type of financing.
(3) Be a banker. Borrow at a cheaper rate, grow at a higher rate. Say, mortgage at 6%, house appreciation at 10%. But will real estate ALWAYS grow at 10%? And which paper assets will give you 10% perpetually?
This is all good under a rising market and assumptions of borrowing at 6% and investing at 8%.
What if it was a slumping market? Your asset base will shrink double the rate as your asset base is now bigger!
And what if your rate of return is less than the bank mortgage?
Well , like all businesses, leverage is a double edged sword. Know your risks and rewards before engaging in real estate.
If you know your figures well, this is the Rich Dad' sway to Financial freedom the real estate way... with all the nitty gritty explained.
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