Wisdom of Rich Dad

People are very entertaining if you just take time to listen to what they say and observe how they act. After all, that’s why reality television shows are so popular. Now you can watch people from the comfort of your living room chair.

The things they do and say are so highly entertaining because people so often react based on emotion. Often, that emotion is fear. Throw in a little laziness and a willingness to believe whatever they hear that justifies their fear and there you have them-the two most wealth-preventing myths about real estate investing that were ever conceived. And those two are the parents of the third.

Those myths are, of course, fear-based. They are also myths that would not exist if it were human nature to educate themselves about a thing before making up their minds about it.

What are those myths?

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The bears, it seems, are now queueing up to warn that the remarkable rises in nearly all assets in 2009 is likely to end in another crash.

Today The Economist stepped forward. It says low interest rates have persuaded investors to seek out better returns, buying ‘risky assets’.

On shares…

It warned that the US market is still ‘nearly 50% overvalued on the best long-term measure, which adjusts profits to allow for the economic cycle, and is on a par with two of the four great valuation peaks in the 20th century, in 1901 and 1966.’

On house prices…

The Economist says American homes are priced at around fair value on the basis of rental yields, but that British homes are overvalued by almost 30% – and by 50% in Australia, Hong Kong and Spain.But not a bubble yet…

Today’s leader column also points out: ‘Two classic symptoms of a bubble are rapid growth in private-sector credit and an outbreak of public enthusiasm for particular assets’ [when a cab driver is giving you share tips or telling you about the gold bullion under his bed] ‘There’s no sign of either of those. But the longer the world keeps its interest rates close to zero, the greater the danger that bubbles will appear.’

It suggests emerging markets and commodities are the most likely candidates for bubbles. That will be resisted by believers of the commodities ’super-cycle’, such as legendary speculator Jim Rogers, a former investment partner with billionaire George Soros. [Jim Rogers on why Britain's economy is doomed]. He expects the price of gold to nearly double in the next decade, despite already rising four-fold in the past decade.

Interest rates threat

The biggest threat to the elevated levels of assets such as shares and property is a rise in interest rates. But The Economist observes that if world economic growth is slow and then rates won’t need to rise – but profits (and wages) won’t rise fast enough to justify inflated shares prices (and house prices).

If, on the other hand, economic growth, bounces back then rates would have to rise sharply.

‘It doesn’t add up’ – and that’s before you even get on to the issue of the colossal debt problems facing Western nations.

The Economist concludes:

‘Investors tempted to take comfort from the fact that asset prices are still below their peaks would do well to remember that they may yet fall back a very long way. The Japanese stock market still trades at a quarter of the high it reached 20 years ago. The NASDAQ trades at half the level it reached during dotcom mania. Today the prices of many assets are being held up by unsustainable fiscal and monetary stimulus. Something has to give.’

Chilling stuff. This blog and others have made similar warnings. The correction may not be tomorrow, but it will come…

REITs stand for Real Estate Investment Trusts. They are specialized companies that invest in commercial, industrial, residential and healthcare real estates.

Examples on the Singapore Stock Exchange includes CapitaCommerical Trust (Commercial), Cambridge Industrial REIT (industrial), Saizen REIT (residential) and Parkway Life REIT (healthcare). These companies buy and manage properties including shopping malls, offices, hotels, hospitals.

REITs usually pay a generous dividend because they are required by law to distribute most of their earnings to shareholders. In exchange, they receive tax incentives.

Perhaps, we can view REITs as an instrument to buy and own a small portion of a property, while at the same time shared fundings with many other shareholders to employ someone to manage that piece of property. With REITs, we can invest in real estate with no leverage, no property and no need for any stress in finding tenants and collecting rent from them.

REITs investment generally focus on dividend yield. Also, like any stocks on the exchange, investing REITs can also result in capital gain. The same can be said of investing in real properties. However, because REITs are traded on the stock exchange, it’s liquidity is much higher than the actual property itself.

So how do we choose what types of REITs to invest in? I’m not an expert in it, but I shall share some basics of what I think.

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After watching so many people losing their homes, their money and so many other things the past few months to a year, people are convinced that the best investment decision one can make in today’s recession is to stay away from the real estate market. Only a few people are financially intelligent enough to actually see the opportunity in this housing crash to make money and become wealthy.

It is a basic rule in the investing game which everybody knows that you should buy when the price is low and sell when the price is high. With a growing database of foreclosed homes in many US states, some people are actually making money during this housing market crash.

As the prices for foreclosed homes and even new homes continuous to drop every month, real estate investors are being lured back into the market. Just an example, the median price for foreclosed homes in Las Vegas is $99,000 for all cash deals.

However, before you decide to join their game, there are a few questions you need to ask before buying a home to invest:
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Surely everyone has been this way at a certain time?  So what’s the answer? Although there may be no “definitive” answer to this question – there are definitely better and worse places to begin your search for financial freedom too.

Robert Kiyosaki (author of Rich Dad, Poor Dad) talks about the three vehicles that use the rich to create wealth. They are as follows

Stock Market

The stock market allows you to acquire a company and in turn, a stock will receive the profits of the enterprise or the losses.  Professional investors generally create the purse on the cash flow.

Real Estate

Buying real estate can be less intimidating for novice investors to buy as a “thing”. The ability to use your money is to invest one of the best features of the property.  Professional Real Estate Investors generally used for long term capital gain

Business

Business is what you can from the estate of his own company to be employed by someone else.  If you think about it, with a job is like running a business, rather than to sell a product you sell your time. Wealthy people use their business to finance their stock & Real Estate Investments.

I would add a fourth category

Mindset / Education

Even if you do not physically make money from this category, there is no way that you any amount of wealth, without a strong mentality and the knowledge base can be created.

So, where do you start?

The first and most important thing you need to do, ask yourself: ‘Why I want to be rich? ”

Everyone thinks they want to be rich, but many people do not exploring the time what they would actually do if the money wasn’ t an obstacle.

Remember that the wealthy is not just about money. There are many people who earn millions of dollars per year, but do not have any free time to visit her family or who are not really satisfied with their lives. To be really rich, I think you need to have wealth and the election in four main areas

1st Financial – enough money to do it all, you dream about

2nd Time – to be able to spend your time as you want

3rd Family / Love – have great relationships and a group of people that interest you

4th Achievement / Contribution – be who you are proudand what you have done

So if you’re wondering why I want to be rich, ensure that your answer includes all of these areas in some way.

The next step is to decide what your first strategy will be.  The share market, real estate or your business? Do you always start out small, do not try to bite off  more than you can digest, and definitely not get too far away.

If you try too quickly to You end up with a bad experience and it can eliminate them investment for life. Once you create a strategy that works then repeat it and start looking for a different strategy to learn.

As Robert Kiyosaki says the stock market, real estate Business and creates the best results if they are employed in line, but you go before you can run, need. One strategy at a time is definitely the best option.

The last step, and by far the hardest and most terrifying part is this whole process, reward yourself! Celebrate your successes will encourage you to continue your good work and always remember, there is much more than to be rich with a lot of money.

So what are you waiting for? Take action now, quite simply – Do Something! “A journey of a thousand miles must end with a single step” – Lao Tzu

I would like to announce my latest web property – Real Estate Investment Game.

The game is about buying and selling virtual property. You are presented with virtual apartments in different looks, along with various data, including market value and tenancy count. You can also see who owns the apartments and you can decide whether to buy the properties or not. To increase your apartments’ attractiveness, you can upgrade them with various upgrades, such as apartments’ maintenance to keep yours squeaky clean (and have better market value.)

You can play with either real money or play money.

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