Solid Advice On Real Estate Investing

Author of the ?Cash Flow Quadrant? book, Robert Kiyosaki, says his ?Rich Dad? asserts that investing is not rocket-science. Rich Dad suggested it?s just an issue of using sound judgment. But it?s common knowledge that common-sense is not, in fact, all that wide-spread.

According to ?Rich Dad?, the ?worst? investors are individuals who have simply not educated themselves about the process. They adopt the point of view that investing is either a scam or just too risky. Others leap before they look and wind up suffering a loss.

The smarted opinion anyone can have having to do with buying investment property is just to educate oneself. If, in your haste to ?get rich?, you start investing without that education, you will be doing yourself a tragic disservice. One of your most valuable resources is time and if you squander that, you will often find that your money will follow - money you have in hand that you wind up losing, money you would have earned if you?d just invested the time to learn the process.

?That?s great,? you might say. You presumably will accede that studying good information is invariably a smart thing. Knowledge is power, after all?. ?What instruction do I need?? might be your 1st question. Your second is probably, ?How do I get it??

The very 1st thing you should do is study some essential accounting, which is not as ambiguous as it appears to be. Accounting is the lexicon of business. If you are going to invest in a company or an investment property or what have you, you will want to be willing to check in on it to see whether it?ll be a benefit (make you money) or a burden (lose your money). It seems like logic when you look at it, doesn't it? But if you want to be able to determine these things, you will have to be able to evaluate balance sheets.

There are four basic kinds of financial statements: balance sheets, income statements, cash flow statements, and statements that express changes in shareholder equity. The last is pretty self-explanatory, and addresses the difference between at 2 individual points in time. A shareholder?s equity is the net worth of a company, or it?s total assets minus its expenditures.

A ?cash flow statement? is a form that depicts the cash needed to make a company run, plus where that money came from. Wikipedia relates a corporation to a large kettle of H20 that holds more of the liquid and has pipes pouring from within to the outside of it - into the investor?s pockets and others to whom the company is in debt. Your cash flow statement aspires to give an account the movement of that liquid ? or the movement of that money.

The earnings (or profit-and-loss statement) watches out for a company's earnings and losses due to expenditures over a given time period, while the balance sheet gives an account the same thing for one particular time-period and addresses assets and liabilities.

It all seems quite straight-forward until you think about ?Rich Dad?s? advice on discerning your assets and your liabilities apart. He said that your lending institution, for instance, will claim your home as an asset. It seems reasonable. After all, it?s something you own, right? Yet according to Kiyosaki's rich dad's definition of assets and liabilities, your house is actually a liability. It?s a liability because it will eventually cost you money in payments and repairs. It definitely isn't earning money for you, and up to the time it starts doing that (say, you change residence and are able to rent the first property out to make a profit), then it still is not an asset on your balance sheet.

Not that the bank is lying to you outright. The house you are living in is an asset on THEIR balance sheet because it is making money for THEM.

That?s the kind of thing you can figure out for yourself and ascertain whether you are earning or losing money on an investment, if you make the time to get an education. Don?t forget: Knowledge is POWER.

Alex Anderson is a licensed Minneapolis Realtor Who Helps Minnesota Real Estate Investors To Buy And Sell Property. Download A Free Copy Of "The Investors' Rental Guide" At www.GreatInvestmentProperty.com

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