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With elevated home prices these days, buying a house can be a significant challenge. But for “Rich Dad Poor Dad" author Robert Kiyosaki, it’s a breeze.
During an interview with personal finance YouTuber Sharan Hegde, Kiyosaki stated, “I own 15,000 houses.”
Hegde asked if Kiyosaki rents out these houses to collect income, to which Kiyosaki simply responded, "Yeah."
The famed author elaborated on the topic of purchasing a house, explaining,
“Nothing wrong with buying a house. The difference is, I use debt to buy it, and I pay no taxes. It’s not the house, it’s not the stock, it’s not the bond, it’s not the ETF. It’s your brains.”
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Use debt and pay no taxes?
Kiyosaki is referring to a strategy often employed by real estate investors. They often use borrowed money (debt) to finance their purchases. This allows them to acquire more assets than they could with their own money alone. Mortgage interest from these loans can be deducted from taxable income, lowering their overall tax burden.
In addition, investors can claim expense deductions for property taxes, property insurance, and costs associated with managing and maintaining the property, such as repairs, maintenance, and property management fees.
By leveraging debt and taking advantage of tax deductions, real estate investors can boost their returns while minimizing taxes.
If this is an approach you want to take, it should be done with caution — and hiring a financial advisor is a smart approach.
With Advisor.com, you can find the right financial professional to help you fulfill your wealth goals. It’s a free service that helps you find the right financial advisor for you, by matching you with a small list of the best options for you to choose from.
Set up a free, no-obligation consultation with one of their pre-screened financial advisors today.
Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
Asset vs. liability
Kiyosaki distinguishes between income-generating properties and a primary residence, emphasizing they serve different financial purposes.
“Your house is not an asset,” Kiyosaki said.
According to Kiyosaki, there’s an easy way to determine if something is an asset.
“What is the definition of the word? If it puts money in my pocket, it’s an asset. If my house is taking money from my pocket, it’s a liability,” he explained.
By this definition, a primary residence is not an asset. Most homeowners face mortgage payments, property taxes, insurance and maintenance costs, which take money out of their pockets.
If you want to use real estate to generate income, you can still benefit from home ownership without buying a house. New investing platforms are making it easier than ever to tap into the real estate market.
For accredited investors, Homeshares gives access to the $36 trillion U.S. home equity market, which has historically been the exclusive playground of institutional investors.
With a minimum investment of $25,000, investors can gain direct exposure to hundreds of owner-occupied homes in top U.S. cities through their U.S. Home Equity Fund — without the headaches of buying, owning or managing property.
With risk-adjusted internal returns ranging from 12% to 18%, this approach provides an effective, hands-off way to invest in owner-occupied residential properties across regional markets.
If you’re not an accredited investor, crowdfunding platforms like Arrived allows you to enter the real estate market for as little as $100.
Arrived offers you access to shares of SEC-qualified investments in rental homes and vacation rentals, curated and vetted for their appreciation and income potential.
Backed by world-class investors like Jeff Bezos, Arrived makes it easy to fit these properties into your investment portfolio regardless of your income level. Their flexible investment amounts and simplified process allows accredited and non-accredited investors to take advantage of this inflation-hedging asset class without any extra work on your part.
Becoming a real estate mogul
Of course, you can invest in income-producing real estate assets. After all, in an era where passive income has become a big buzzword, one of the most popular ways to create a passive income stream is through real estate — at least in theory.
The good news? These days, you can invest in real estate without becoming a landlord. For instance, necessity-based commercial real estate are properties that serve an essential function – like health-care facilities or grocery stores – making these properties in demand because they are always in need regardless of economic conditions.
With First National Realty Partners (FNRP), you can enter the world of commercial real estate and enjoy the potential returns of deals anchored by necessity-based properties.
FNRP has developed relationships with the nation’s largest essential-needs brands, including Kroger, Walmart and Whole Foods, and provides insights into the best properties both on- and off-market
FNRP’s secure online platform makes investing in commercial real estate convenient and simple. You can engage with experts, explore available deals and easily make an allocation, all in one personalized portal.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
