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Author of the “Cash Flow Quadrant” book, Robert Kiyosaki, says his “Rich Dad” asserts that investing isn’t rocket science. Rich Dad suggested it was just a matter of using common sense. But we all know that wisdom isn’t, in fact, all that typical. According to Kiyosaki, the lowest levels of investors are individuals who simply have not studied the process. They assume that investing is either too risky or a scam. Others skip their do-diligence and end up suffering a loss. The smarted advice anyone can give you having to do with investing in real estate is just to educate oneself. If, in your rush to “get rich”, you jump in without that education, you’ll be doing yourself a tragic disservice. Time is your most important resource and if you waste that, you’ll usually find that your money will be lost as well - money you have that you end up squandering, equity you could have earned if you’d just taken the time to master the process. “That is just fine and dandy,” you may say. You presumably will accede that education is typically a helpful thing. Knowledge is power, after all…. But “what instruction should I get?” might be your 1st question. Your second question is probably going to be, “How do I go about getting it?” The 1st skill you may want to study is some fundamental accounting, which isn’t as ambiguous as it appears to be. Accounting is the language of finance. If you are going to invest in a business or an investment property (or whatever), you’ll need to be willing to check up on it and see if it will be an asset (earn you money) or a burden (lose your money). It seems like logic when you ponder it, doesn't it? But in order to be able to ascertain these things, you’ll want to be able to read accounting-statements. There are 4 common kinds of financial statements: cash flow statements, income statements, balance sheets, and statements that express changes in share-holder equity. The last is pretty self explanatory, and deals with the difference surrounded by equity at two different points in time. Shareholder equity is it’s total assets subtracting it’s total liabilities, basically the net worth of a business. The cash flow statement is a certificate that details the cash used in making a company function correctly, plus where that money came from. Wikipedia compares a company to a large container of water that holds more of the liquid and has pipes pouring out of it - into the pockets of the investors and others to whom the business owes money to. The cash-flow-statement attempts to explain the activity of that liquid – or in other words the movement of your cash. The earnings (or profit-and-loss statement) watches out for a company's earnings and expenses over a given time period, as the balance sheet gives an account the same thing for 1 single moment in time and deals with assets and liabilities. It may seem very straight-forward until you reflect upon Kiyosaki's advice on discerning your liabilities and assets apart from one another. He said that the lending institution, for example, will declare your house as an asset. It sounds rational. After all, it is a thing you own, right? But as stated by Kiyosaki's rich dad's statement of assets and liabilities, your house is in fact a liability. It’s considered a liability because it ultimately costs you money in payments and updates. It undoubtedly isn't making money for you, and until it begins doing that (say, you buy another house and are able to charge enough rent to make you some money), at this point it still isn’t an asset on your balance sheet. The bank isn’t actually 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 sort of thing you can figure out for yourself and determine whether you are losing or making money on an investment, if you take the time to educate yourself education. Don’t forget: Knowledge is POWER.
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Alex Anderson Can Help Any Minnesota First Time Home Buyer To Find The Perfect Home Or Investment Properties Minnesota. Visit Her Website For A Free Copy Of "The Investors' Rental Guide At" www.GreatInvestmentProperty.com
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