Robert Kiyosaki's Rich Dad, Poor Dad series of real estate investing books focuses on getting people to figure out whether they should be spending money on a particular piece of property or not. A successful investment, as expressed by Mr. Kiyosaki, is one that will give the investor a return on the investment in a reasonable amount of time. A strong investment is one that isn't a whole lot of capital outlay, like as repairs, to offset the income from the rent.
A lot of people believe that their home is an asset, but that’s not necessarily the case. Since there’s no money to be earned from most dwellings, most homes are liabilities. It is for that reason, the mortgage loan one gets to buy a home is considered what Robert Kiyosaki calls “bad debt”. There is no cash flow. There is only expense.
“Bad debt” (and liability) is considered undesirable to investors, in particularly because the possession of a house is a misconception. The homeowner believes that he owns a house, simply because he is paying for the right to live in it. On the other hand, if he were to neglect payment for that right, the bank would foreclose and he would be evicted immediately.
What he/she owns in reality is equity, and equity is nothing but numbers. Never the less, collect enough equity and it will morph into a property deed. Event better, it’ll dissolve your “bad debt”.
When you build equity, you decrease undesirable debt. “Bad debt” is bad. Decreasing bad debt is good.
As a homeowner, we can decrease this type of “bad debt” in 2 ways. The most obvious way, of course, is to increase the amount paid on the principal each year, or even each month, by making more payments. It is wise to research a head of time, however, that the loan does not specify forfeiture for paying early. It is even wiser for the person who is thinking about getting a loan, to make sure it doesn't have a stipulation like this prior to signing it in the 1st place.
Another way to reduce bad debt and increase equity is by turning a 30-year mortgage into a 15-year loan through refinancing. This can mean that the homeowner is paying less interest in the long run, but paying more per month. If he/she can afford to do that, it’s a great way to accelerate equity. Making extra payments will reduce only 1/2 as much time off the total time to pay the mortgage loan as refinancing will.
Reading the Rich Dad, Poor Dad series explains to the reader that it is a good idea to study as much as possible about the process of purchasing and paying for real estate, because those who can to benefit from the buyer's ignorance will certainly not volunteer information. There are ways around spending one's complete existence paying for an individual investment property. Considering at the process of purchasing a home, not as a resident, but as a real estate investor, will make it obvious that most people fork out far more money than they need to, simply because they do not know not too. Knowledge is the homeowner's greatest asset.
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