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By Alex Anderson
Author of the Rich Dad book series, Robert Kiyosaki, says his Rich Dad asserts that investing in real estate isn t rocket-science. He said it s simply a matter of using sound judgment. But it s common knowledge that common-sense isn t, in fact, all that typical.
Kiyosaki also says, the worst investors are those who have simply not studied the things that produce positive results. They adopt the viewpoint that investing in real estate is either too much of a risk or a rip off. Others leap before they look and end up losing money.
The best advice anyone can give you having to do with investing is simply to educate oneself. If, in your haste to make money, you take action without an education, you will be doing yourself a great 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 that you wind up losing, equity you would have made if you d just taken the time to figure out the techniques of successful investors.
That is great, you may say. You probably accede that getting a good education is invariably a good thing. At the end of the day, knowledge is power. But what education should I get? may be your 1st question. Your 2nd is probably going to be, How do I go about getting it?
The first thing you should do is study some essential accounting, which is not as ambiguous as it sounds. Accounting is the language of business. If you re investing in a company or a piece of property or what have you, you will want to be willing to check up on it and see if it will be a benefit (earn you money) or a liability (lose your money). It sounds like common wisdom when you think about it, doesn’t it? But if you want to be able to determine those things, you will want to be able to evaluate your financial-statements.
There are 4 basic types of financial statements: cash flow statements, income statements, balance sheets, and statements that express changes in a share holder s equity. The last is pretty self explanatory, and deals with the characteristics that lie surrounded by equity at two opposing points in time. Shareholder equity is the net worth of a company, or it s total assets minus its total liabilities.
Your cash flow statement is a document that details the cash used in making a company function correctly, plus where the money came from. Wikipedia relates a business to a large vat of water that holds more of the liquid and also has lines running from within to the outside of it – into the investor s pockets and those to whom the business is in debt. The cash-flow-statement attempts to describe the activity of the water or the flow of your cash.
The earnings (or P&L statement) watches out for a company’s earnings and expenses over a given time period, as the balance sheet provides a description the same thing for 1 distinct window of time and addresses assets and liabilities.
It may seem quite straight-forward until you reflect upon Kiyosaki’s words on discerning your assets and your liabilities apart from one another. He says that the lending institution, for instance, will list your home as an asset. It seems reasonable. After all, it s something you own, right? Yet as stated by Kiyosaki’s rich dad’s statement of liabilities and assets, your house is in fact a liability. It s considered a liability because it ultimately costs you money in dues and updates. It undoubtedly is not making income for you, and up to the time it starts doing that (say, you move out and are able to rent the first property out to make a profit), then it is not an asset.
Not that the bank is lying to you outright. A house is an asset on their balance sheet because it is making money for THEM.
That s the type of thing you can decide for yourself and determine whether you are losing or making money on an investment, if you take the time to educate yourself education. Remember: Knowledge is POWER.
About the Author: Alex Anderson Specializes In Selling
MN Real Estate
And
Minnesota Investment Properties
. Visit Her Website For A Free Copy Of “The Investors’ Rental Guide” At www.GreatInvestmentProperty.com
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