The Best Of Times Or The Worst? You Decide!

I am a big Robert Kiyosaki fan ( of “Rich Dad, Poor Dad” fame). One of the things Kiyosaki really harps on is that – rather than focus on income (i.e. getting a job, a salary, etc), focus instead on acquiring assets that will generate income. He says that if you invest in things that produce cash flow (income), then you don’t need to worry about what the value of the asset is doing. SO TRUE!!
 
The one asset that I have been able to keep through the ups and downs of this economy has been my parking space downtown. I bought it through my retirement plan in Dec ‘03.  I had a mutual fund that I cashed in and I used the money to buy the parking spot. The mutual fund had done pretty well – it was heavy in technology stocks and technology had done very well while I owned it. But technology crashed and so did my fund – so I decided it was time to do something different with it. Now I own a parking space free and clear through a self-directed SEP-IRA.

I wish I had bought a few more spaces!! It is been such a great investment! Even in this economy, it’s worth about 50% more than what I paid for it. I’ve had it for a little more than 6 years. Not a bad ROI - particularly when you consider that most people’s real estate is DOWN 25% – 30% in that time frame! Now, mind you, there’s no chance of retiring on the income. However, I’ve kept about 1/2 the rent checks this past year instead of putting them back into the fund to help out with my OTHER negative cash flow areas. (I like to keep a buffer in the fund to cover expenses in case I sit empty without a tenant for awhile.) 

About 2 years ago, because of the poor market and resulting losses in my brokerage business, I decided to convert the asset from a conventional IRA to a ROTH IRA. That sucked up my cash reserves. I had to pay a 10% penalty to withdraw the asset out of the conventional ROTH. However, I ended up getting all that money back (as I said, due to the heavy losses in my brokerage business.) And what’s WAY cool is I was able to do all that just from the income that the space generated. And now, with the conversion to a ROTH IRA, I have an asset that I can eventually sell or withdraw income from and not owe any taxes on! So I am very pleased with that outcome! 

In “Rich Dad, Poor Dad”, Kiyosaki said that your home is a liability. At the time (10 years ago?), it seemed to be quite an outrageous statement. People were quite upset about it (including me). He’s not against people owning their home – he just says that people are confused if they think their home is an asset. Your home is a place to LIVE. A home doesn’t generate income the way my parking space does - it generates EXPENSES! Well, with 10 years’ of hindsight, it’s pretty clear that Kiyosaki wasn’t so crazy. That’s why people are losing their homes - they can’t afford to meet the expenses of owning it!! Now – granted – you have to spend money to live SOMEWHERE…it may as well be in something that you own. But to think of something that costs money rather than pays you money as an asset… well, Kiyosaki would say that you don’t understand the definition of “asset”.

In one of Kiyosaki’s lastest books: ”Conspiracy of the Rich”, he compares his lifestyle with that of a high school buddy. The buddy and his wife have high paying jobs and good salaries. They focused on generating income through having good jobs. Instead, Kiyosaki and his wife focused on generating income through owning assets that create cash flow (i.e. income). And 30 – 40 years later, they are sitting in very different places. Kiyosaki went through some rough patches to get to where he is – but today, he is financially free. He doesn’t need to worry about retirement or losing his job or not having income. He is set for life – and beyond! When I read that, my thought was:

“I need to start figuring out ways I can generate more income-producing assets like my parking space!”

One final Kiyosaki thought: this can either be the best of times or the worst of times. How you approach it and what you do about it is what will determine which one it is for you. From my perspective of being in real estate for 30 years, I have not seen a better time to buy income-producing assets. These are not just limited to real estate – that just happens to be the one I know the most about. Let me know if I can be of help! 

“To Your Success!”
mary!

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