There’s a guy in the US called Keith Cunningham, who many people say is the real ‘Rich Dad’ that Robert Kiyosaki got a lot of his teachings from.
He was definitely a major influence on Robert, particularly in the development of the ‘cashflow quadrant’.
Now, Keith was a big time real estate investor in the South West of America.
He had ridden up one of the world’s biggest real estate boom – and then it collapsed like a house of cards.
Him and his friends were up to their eye balls in debt – and had liabilities that far exceeded the value of their assets.
They were so underwater they needed scuba diving gear!
And, they had gone from being wealthy ‘hot shots’ to paupers almost overnight…so their egos had taken a hit too.
They were keen to start rebuilding again, but one of them had the good sense to say:
‘Lets write down the lessons of this time, so we don’t repeat the same mistakes’.
So that’s what they did. And here’s some of the lessons they learned below, which could serve you in your real estate business – and lie in general.
Oh and on a brighter note; this exercise seemed to have worked, because Keith reports that none of them ‘imploded’ again financially.
1. Land eats three meals per day
2. You must keep a conservative strategy during the good times because you generally don’t know you’re in a bad time until it’s too late.
3. A good market tends to hide mistakes. Nothing takes the place of being actively engaged in the running of your business and being thoughtful as well as skeptical about the future.
4. True wealth is built slowly. Speed and greed necessitate aggressive leverage and increase the odds of catastrophe.
5. The best way to avoid losses and to stay financially healthy is to “sell too soon.” The old real estate maxim of, “In the history of the world, the seller is always wrong” is outrageously stupid!
6. Never buy something because you think you might need it someday. Have a definite purpose or use in mind TODAY!
7. The euphoria of a hot market usually results in ignoring marketplace fundamentals.
8. Just because rents have gone up 5% per year for the last 5 years doesn’t mean they can’t go down 25% in one year.
9. It takes 5 good deals to make up for one bad deal.
10. Debt gives the illusion of wealth. True wealth is assets, cash flow and no debt.
11. Stay lean even if you can afford to get fat. Keep overhead low!
12. Watch your cash VERY closely. Ask yourself, “Do I really need this?… Will this help me make more money?” Once you spend it, the cash is gone.
13. Each line item of your financials should be scrutinized on a continuous basis to make.
14. Conserve cash, especially during the good times. Spending money to look like a big deal is not the same as being a big deal.
Hope you got some food for thought to guide you in your own wealth creation journey.