fbpx

Rich Dad, Poor Dad: The First Book I Read That Got My Mind Tweaked…

The first book I read- Rich Dad Poor Dad

Sometimes a book can really change your outlook and your perception of your opportunities. In 2002, I was working at Home Depot, assisting a friend in starting a painting company. Additionally, I was going to college full time. I had some extra time on my hands lol. I had also just bought my first rental property. During this time, I went to a multi-level marketing event. They were selling a website portal where you could purchase groceries online.  This was well before the time of Amazon.  The business model was to have each subscriber pay a monthly or yearly fee, like Costco or Sams Club. Consequently, the subscriber would have the ability to  purchase items online for delivery like paper towels, soap and other household items.

One of the guys at the event gave me two books: Rich Dad, Poor Dad by Robert Kiyosaki  and Cash Flow Quadrant by Robert Kiyosaki . Are you looking for a book that will help you take the LEAP? These are probably my top two books that tweaked my mind! Start your business today!

Cash Flow Quadrant: If You’ve Never Read It, You Must

The “quadrant” is broken up into 4 parts:  E (employee), S (subcontractor), B (business owner) and I (investor).  The premises behind the whole book is that if you’re an employee, you trade your time for money.  A Subcontractor (meaning a trade job – Lawyer, Doctor, Painter, Carpenter, etc.) you’re trading your time for money, but there is no real way to scale this.  For example, if you are a doctor and you don’t show up, you make no money, because you have no billable hours.  At the time I was painting houses so it really resonated with me to say, “Hugo, the only way that you can make money, is if you show up and paint this guy’s living room”.  That, I understood.  It changed they way I started to think.

If you are a business owner you are still working in the business and on the business and have to be there to managed that process. But you can scale, grow and make more money.

As an investor, you are looking for passive income opportunities.  Such as real estate, where you can make the purchase once, and the amount of money you make is disproportional to your time spent.  For example, if it takes you an hour a month to manage the property, and you are making $200-300 per month in passive income, your income is disproportionate to the amount of time spent on that property. If you purchase stock in a company and get a dividend and do no work, you are making more income with less effort. Both of these can be scaled.

Rich Dad, Poor Dad: New Ideas That Inspire Entrepreneurs

The second book, Rich Dad, Poor Dad, is about the author as a boy. He watched two dads (friend of the family and biological dad) work their whole lives. His own father was a school teacher and worked every day. His friend’s father was an investor. He saw how much wealthier this friend’s dad got. As a result, he started to work less and less.

I have always remembered this. How can you think bigger. Think outside the box and look for new opportunities.  For instance, with a SaaS (software as a service business) you probably spend a ton of money and a ton of time marketing it, growing it, and getting businesses to sign up for a monthly service fee.  Furthermore, once you build it and build the client base, you are charging everyone throughout the month for the service. As a result, if you need to have Monday off, you can take Monday off and the world still turns and you still get paid.  It is a great business model. BUT it does take a lot of work and time to get it to that point. (As a side note if you are interested in building your own SaaS platform, I am happy to advise you, click here)

Right now, I am back to being an employee, a business owner and an investor.  I get most of my income from “E” quadrant but my goal is to start and grow more businesses so that more of my income comes from the “B” quadrant so that I can invest more money and time in the “I” quadrant.

You can fit yourself in many different groups.  I see the goal as getting to a place where you have enough passive income to be solely in the “Investor” category.

Both of those books helped me see that there was more to life than just a job for 35 years. These books helped me take risks and explore new opportunities.

Death of the Triple Net Lease

Triple Net Lease Walgreen Property for Real Estate Investors

I was into residential real estate back in the mid-2000’s until I got crushed. Part of my goal was to flip enough houses to save up $200,000 so I could buy a triple net lease investment property.  It never happened then, at least not yet 🙂

What Is A Triple Net Lease

What is a triple net lease property?  A few examples you may know are stand-alone Starbucks; stand-alone Dollar General; stand-alone Walgreens; any stand-alone retail store(s) that are backed by corporate names.  The reason why you would want to buy something like that is because you could put your $200,000 down on a million-dollar property and Dollar General or Walgreens would give you a 15-year, 20-year or sometimes even a 30-year lease.  Starbucks was always an 8 to 10-year, or 12- or 15-year lease.  There were a few Walgreens, depending on the location, that would give you a 30-year lease as well.

Wikipedia defines Triple Net as “A triple net lease (NetNetNet or NNN) is a lease agreement on a property. The tenant or lessee agrees to pay all real estate taxes, building insurance, and maintenance (the three “Nets”) on the property. Additionally, they agree to any normal fees that are expected under the agreement (rent, utilities, etc.).”

Are You Ok With Putting All Your Eggs In One Basket?

This means that the investor signs the lease. The tenant, not the owner, is responsible for the taxes, the insurance and the maintenance for the duration of the lease.  When looking at real estate and having a hands-off approach, there is nothing better than having a corporate tenant that will guaranty the lease and pay all the carrying costs.

That is if you are OK putting all your eggs in one basket. I would argue that this is just a piece of your investment strategy. Meaning, if you are looking for monthly income, this is one spot out of five or ten.

Diversification On Location

Diversification on location and corporate client is very important.   This post stems from a conversation that I had with my Aunt. I had to write about it.  My Aunt has a theory that everything is moving online.  Amazon, or the Amazon’s of the world, are crushing the individual retailers.

Take a look at your buying habits. Who remembers Sam Goddy or Radio Shack? What happened? iTunes and Amazon.  How is Amazon changing Home goods? Is Amazon changing Best Buy?  Do you feel that Amazon is changing Walmart and Walgreens?

Old Malls will change for the modern economy

Old Habits Die hard

My Aunt’s theory is that she believes the old school shopping malls. The malls where all the stores are under one roof. Where everything is facing inward and you remember walking around them as a teen and “hanging out”.  Most have a central hallway of sorts, either one-story or two.  She believes these types of properties are going away.

The structures will stay, but their existing function of retail space will be replaced by a new, “micro manufacturing community”.  Multiple storefronts will turn into small manufacturing facilities, or storage units, for individual companies who want to have a retail and shipping location but also could double as a store front.   They have the parking lot for the trucks. The buildings have the warehouse docs for the distributions. The property even has individual gates that can be blocked in order to store product.  I think she is on to something.

DIY Spaces Where People Can Gather to Create, Invent & Learn

If you look at the makerspace movement, defined here: “Makerspaces, sometimes also referred to as hackerspaces, hackspaces, and fablabs are creative, DIY spaces where people can gather to create, invent, and learn. In libraries they often have 3D printers, software, electronics, craft and hardware supplies and tools, and more”, would allow for a transformation of this old dead type of real estate.

I speak around the United States and I talk about how we are in the “McDonald’s economy” . Everybody wants everything now, now, now, now.  When we buy things on Amazon in many cities, you can get your purchase that day or the next day. Even if you are in a rural area, you can get it in 2 days.

Look at the long-term view of the triple net lease of a brick and mortar store. I think the only survivors in that space are going to be the ones that offer services. For example doctors offices, dentists, and gyms.  The spaces where people need to go to see somebody or physically do something, and not to simply purchase products.

As you look at building out your real estate portfolio, you may want to consider this.

What Is A REIT & Will They Pop This Year?

REITs

In August, real estate will be the 11th sector to be included in the S&P 500

What is a REIT according to Wikipedia? “A real estate investment trust (REIT) is a company that owns, and in most cases operates, income-producing real estate. REITs own many types of commercial real estate. Ranging from office and apartment buildings to warehouses, hospitals, shopping centers,  hotels and even timberlands. Furthermore, some REITs also engage in financing real estate.”

REIT Stocks: Higher Dividends

I met with a client this past week. He brought to my attention that he was looking at REIT stocks. I asked him why and dug a little more. I’m dork about learning new information. REITs pay out higher dividends and by law have to pay out 90% of their earnings. Wikipedia explains this here. “REITs are strong income vehicles because to legally avoid paying U.S. Federal income tax, REITs generally must pay out at least 90 percent of their taxable income in the form of dividends to shareholders”

In conclusion, my client was only looking at this from a standpoint that if he owned index funds and mutual funds for that matter, those funds would have to now buy/hold REITs.  I was looking at it from a point of view that now all the “Index funds” are forced to buy into the REITs. That said, the theory is that there are REITs that will become the 11th sector in the S&P 500.

Let’s go back to simple economics; supply and demand. There are a limited number of shares so if demand is forced to increase, then they will drive the price of all 25 stocks up. Time will tell.