My Highlights The 3+1 Plan Book:
- This confirms the remark made by the famous Robert Kiyosaki, of 'Rich Dad, Poor Dad' fame, that the rich may make their money from shares or businesses, but, whatever its source, they hold their wealth in property.
- In the UK, as in Australia, the average person spends one third of their income on taxes, another third on living and the final third on rent or mortgage payments.
- So what type of properties should you buy? You will generally buy a similar type of property that you would live in yourself.
- Focus on having a small portfolio, and you will very quickly realise how easy this plan is to achieve. Once you own three properties, owning seven, ten or even fifteen, is not that much more of a step!
- For me, The 3+1 Plan is not something that i would ever use to retire early; I simply use it as an emotional pillow. You see, now that I have achieved the plan, I can rest every night in the knowledge that if I weren't enjoying what I do, I would have the freedom to choose something else.
- I find that when most people start to build a portfolio, they uncover a massive control issue. This is something that you will have to overcome if you want to build a portfolio. In my experience, the biggest issue you will face in your portfolio is letting go of control.
- Just wait until your first remortgage: it might only be for £20,000, but when you add the actual hours you worked on that property, you will wonder why you didn't start years ago.
- Property is a slow-moving wealth vehicle. The important thing to remember is that everything happens slowly.
- Raising The Capital:
1- Using your savings
2- Using existing equity by remortgaging
3- Borrowing from friends and family
4- Borrowing from other places
- The most important word in property 'LEVERAGE'
- OPT and OPM (Other People's Time and Other People's Money)
- Achieving the maximum leverage is very important if you want to buy more properties.
- One of the biggest lessons you can learn in property is that the real money in property is in the holding
- There are two primary reasons that we buy property, The first is for capital growth and this is essential, so that as inflation degrades the value of our investments, the capital growth will ensure that they remain equal of above the rate of inflation (traditionally property has done this). The second is to create a cash flow to fund our lifestyles.
- It only takes one missed mortgage payment to stuff up your credit rating and stop al chance of achieving the 3+1 Plan (Or at least delaying it).
- There are three factors to take into account when calculating your cash flow:
1- Your income
2- The property's income (After expenses)
3- The principle of trading capital for cash flow
- Remember: Building a portfolio should give you more enjoyment of life, not less.
- In the UK it it less and less likely that you will have a cash flow positive property unless you are buying a low-value property. The basic point is this: Your portfolio is unlikely to fund itself from the beginning. To do that, you would need to put a massive deposit on each property, which would burn up capital very quickly limiting the size and speed of growth of your portfolio.
- In some city centre locations you may have to provide furniture. As always, do your due diligence and be flexible to change: the object is to get the property let quickly. Consider that an average futniture pack costs you £2,500 for a two-bedroom apartment.
- Monthly mortgage payement - I only ever choose interest-only payments.
- Total monthly profit / shortfall - This is the amount of total profit / shortfall per month. As an average, in the UK it will range somewhere between £500 profit through to £500 shortfall per property.
- Most people are primarily motivated by two things: the desire to increase pleasure and, the desire to avoid pain.
- FOUR portfolio building strategies:
1. 7-10 Strategy (Buy 7-10 properties and hold them for 7-10 years)
2. 1-2 Stop strategy (Buy a couple of properties and stop investing)
3. 5 and HOLD strategy (Build your portfolio to FIVE and hold off investing further)
4. The question mark strategy (How many properties do you need to fund your lifestyle)
- A little saying i have always remembered on how to be successful:
step 1 - Learn how to do the right thing.
step 2 - Do the right thing
step 3 - Repeat step 2 until it isn't the right thing anymore, then return to step 1.
- Remember, it's all about Set and Forget. The better you Set your portfolio up, the more you can Forget the portfolio on an ongoing basis.
- Your 3+1 Plan will give you the pension you wanted, buy achieving 5+ properties tends to open your eyes to the lifestyle possibilities. It's also about the time when you stop talking in terms of how many properties you own and start talking about how much they are worth.
- Investment Properties, You should never pay your mortgage down on these, and you should always opt for interest only. That way your mortgage balance will stay the same throughout, but your value will double, effectively cutting your mortgage in half or more. (on 7-10 plan)
- The simple way of explaining a quite intricate set of dynamics is that is shoots up, stagnates and then shoots up again.
- There are four phases:
1. Steady / Watch Cash Flow
2. Stagnate / Buy
3. Galloping / Buy / Remortgage
4. Galloping / Restructuring
- I remember Peter saying that you can make the most money in property when prices are going down. He went on to say that this was not because the prices were actually going down, but because everyone was talking about them going down. My experience has been the same.
- Lack of cash flow will cause your property to be repossessed, but a lack of capital or negative equity will simply stop you from buying more.
- The goal of investing in property is to make money, lots of money, to ease the stress of day - to - day life. The essence of achieving this is actually very simple, and it just needs you to follow some or all of these straightforward strategies.
1. Buy property and flip it
2. Buy, complete and sell
3. Buy, complete, let and hold
- It is vital that you realise that you are an investor not a landlord.
- Strategies for second hang property:
1. Buy, hold and let
2. Buy, renovate and sell
3. Buy, renovate, let and hold
- The most important strategy to be aware of at all time is never to buy above or even at the true value of a property. Astute property investors understand that the best profit is made when you purchase. (though the story of his Newcastle flat making a loss every month contradicts this but thats just me being 'mean' and this point i think is absolutely spot on)
- Whatever you do, do not listen to estate agents who tell you to 'buy now and wait for it to go up,' that 'it's a hotspot,' or that it has 'huge potential'. Make sure you have an independent valuation performed by a reputable company and then negotiate a discount off this value. If you cannot get a discount, then do not buy.
- One of the best financial traits of an investment company is their ability to negotiate discounts on bulk purchases. Much the as going to a supermarket, you get a special discount when you buy bulk. It's exactly the same principle in property.
If you walk in off the street, I always assume that you can negotiate at least 5% discount off any individual property, but a company can negotiate a 12% discount off the asking price of a property because they have reserved 10 units. In some cases discounts can be between 5% and 35%, depending on the market.
- Should you buy from a property investment company? Personally, i've only ever bought through this type of company.
- I no longer worry about running out of money or hanging around for my next pay check. Something changed in my life. I moved from living pay check to pay check to living a life by design. 'By Design' i mean 'My design'.
- If you are living pay check to pay check, then you need to do something different, change something. The definition of stupidity is doing the same thing over and over and expecting a different result.
- The one thing I learned through running hundreds of seminars and consulting sessions is this:
The people who get what they want are the people that know what they want.
- You may not want to fly helicopters, but i challenge you to pick your ONE BIG THING this year and achieve it. It may even be buying your first property!
Think back to last year. What did you really achieve? Was it just another year in your calendar, or did it see you doing something amazing? Maybe you did. If so, that's fantastic!
But yesterday is the past and, as they say, 'When your past is more exciting than your future, you're a has-been!'
- How do you achieve this ONE BIG THING? Simply work backwards from the goal and focus on doing the little things.
- I have a saying that i use with all of my investors. 'If you don't have a purpose, someone will give you theirs!'
Things i'm taking from this book:
- This book makes property seem so simple, whereas i'd love it to be as simple as it sounds, i'm not that naive. However this has lit the fire inside me to pursue property! and the letting side of it, with the principle of rent covering mortgage and build up whats left after expenses to look into more properties.
- For me this book reads and should have a statement or a footnote at the start that says 'This book is only useful if
1) You already have your own house with a mortgage that you can re-mortage and get some equity out
2) You earn between £30-40,000 per year!
As throughout the book he talks about examples like 'i released £70,000 to invest into another....' But i was left thinking.....
If i were to use an analogy of a baby going through the generations....
- crawling - walking - runnning - sprinting
This book is designed and aimed at people who are walking - running
(So if like me your not IN THE PROPERTY GAME don't start here, we need to start off crawling)
- History shows house prices have double every 10-15 years! so if i could get the right property, and can rent it out covering the mortgage and leaving me positive cash flow! Not only would that be a winner, but then also having the capital appreciation on top would be a bonus!
- My property portfolio would be run by me and the budget controlled by me, and not handed over to a stranger to play with.
- When a property sells all profits come directly to ME, after tax and not dribbled to me like a retirement plan!
- You can get FAR MORE out than you put out with LEVERAGE! 20-30% in and get a bank or lender to put up 70% (The problem is getting that 20-30%)
From Rich Dad Poor Dad Book:
- The word 'emotion' stands for 'energy in motion.'
- A job is really a short-term solution to a long-term problem,
- KISS principle -- Keep It Simple Stupid (or Keep It Super Simple)
- An asset puts money in my pocket. A liability takes money out of my pocket.
- Investing is the science of "money making money."
- Accounting is financial literacy or the ability to read numbers
- When someone sues a wealthy individual, they are often met with layers of legal protection and often find that the wealthy person actually owns nothing. They control everything, but own nothing.
- "Cynics criticise, and winners analyse"
- "You become what you study"
- 'It is true your world is only a mirror of you.'
From 'Rich Dad's Cashflow Quadrant Book' :
- "The average person is 95 percent eyes and only 5 percent mind when they invest," said rich dad. "If you want to become a professional in the B and I quadrants, you need to train your eyes to be only 5 percent and train your mind to see the other 95 percent."
- "If money is not first in your head, it won't stick to your hands."
- "Investing is not risky. Being uneducated is risky." Investing is much like flying. If you've been to flight school and spent a number of years gaining experience, then flying is fun and exciting.
- "Your profit is made when you buy, Not when you sell." (On real estate)
- AN E - Works for the system
AN S - Is the system
A B - Creates, owns and/or controls the system
AN I - Invests money into the system
- Passion builds businesses, not fear
- Winston Churchill once said - "Personally, I am always ready to learn, although I do not always like being taught."
- (Left side of the quadrant) - 'Play it safe, Don't take risks'
(Right side of the quadrant) - 'Play it smart, Learn to manage risk'
- "To be successful as an investor or a business owner, you have to emotionally neutral to winning and losing. Winning and losing are just part of the game."
- 'Failure is part of the process of success"
- The process is much like learning to ride a bicycle. At first you fall down a lot. Often times it is frustrating and embarrassing, especially if your friends are watching. But after a while, the falling stops and riding becomes automatic. (Moving from one quadrant to another)
- "Giants often trip and fall, But worms don't, because All they do is dig and crawl."
- 'Security' rather than 'Freedom'
'Avoid risk' rather than 'Learn to manage risk'
'Play it safe' rather than 'Play it smart'
'I can't afford it' rather than 'How can i afford it'
'It's too expensive' rather than 'What is it worth long-term?'
'Diversify' rather than 'Focus'
'What will my friends think?' rather than 'What do i think?'
- It's as easy as buying four green houses for low prices, waiting until the market improves, selling them, and then buying a big red hotel. Life really is a game of Monopoly
- Economies change, but history repeats.
- Historically, if people live to the age of 75 they live through two recessions and one depression.
- "Build a business, and buy real estate."
- Ray Kroc, founder of McDonald's: "My business is not hamburgers. My business is real estate."
"How do you eat an elephant?" The answer is, "One bite at a time" (How to become a successful B and I)
- That is why action always beats inaction. If you take action and make a mistake, at least you have learned something, be it mentally, emotionally or physically.
- "Don't work hard, Work smart."
- In my opinion, games are a superior teaching tool because they require the player to become fully engaged in the learning process while having fun. Playing a game involves a person mentally, emotionally, and physically.
- "For every liability you have, you are somebody else's asset." (a mortgage is a liability but it also is the banks asset)
- That is why he loved rental properties. He encouraged me to buy rental real estate because 'the bank gives you the loan, but your tenant pays for it."
- "The direction of cash flow is everything."
- "Instead of living below your means, focus on expanding your means."
- "Professionals have coaches. Amateurs do not."
- Rich dad told me, "When people are lame, they love to blame."
- "The reason there are few self-made rich people is because few people can tolerate disappointment. Instead of learning to face disappointment, they spend their lives avoiding it."
- "Many people will not head down the street until all the lights are green. That is why they don't go anywhere."
- Never run from what you know you need to learn!
- Begin building pipelines of cash flow to support you and your family
- Your boss's job is to give you a job. It's your job to make yourself rich.
(A selection of highlights i made throughout reading the book RICH DAD'S RETIRE YOUNG RETIRE RICH)
- A question which acted upon can make people millionaires even billionaires, 'How can i do what i do for more people with less work and for a better price?'
- "No. Learning to build a business is like learning anything else. I think clinging to job security all your life is a lot risker than taking the risk to learn to build a business. One risk is short-term and one risk lasts a lifetime."
- "When you get a raise, so does the government." (About pay rises for a job)
- Employee Business Owners
Earns Earns
Taxed Spends
Spends whats left Pays taxes on whats left
- Earned Income 50 percent money
Portfolio Income 25 percent money
Passive Income 0 percent money
- SIGHT is what you see with your eyes.
VISION is what you see with your mind.
- "Your profit is made when you buy, not when you sell.'
- Responsible Society or Victim Society.
- We all know that it is difficult to put more water into a glass that is already full of water; it is also difficult to teach something new to someone whose mind is closed or already filled with other content.
- "The moment you make passive income and portfolio income a part of your life, your life will change."
- "I have never seen a tomorrow. All i have are todays. Today is the word for winners and tomorrow is the word for losers."
- Leverage of assets rather than the leverage of my labor.
- "The trouble with selling your labor for money is that there is only so much you can do. If you learn to acquire or build assets to generate money, you can slowly but surely increase your income."
- It is only a loser who stays at the wrong table forever, losing everything, hoping to prove that they are not a loser.
- "You don't want to own anything. All you want to do is control it."
- "An entrepreneur sees an opportunity, puts together a team, builds a business that profits from the opportunity."
- "Leaders do the right things and managers do things right."
- "Bill Gates is Not the Highest Paid Man in the World." The article went on to day that there are many executives in the world of business who are paid much more than Bill Gates, yet Gates was the richest man in the world. The article stated that at that time, Gates was only paid about $500,000 a year but his asset base was in the billions and growing.
- 1 - Earned
2 - Portfolio
3 - Passive
4 - Residual Income (income from a business, such as a network marketing business or a franchise business you own but someone else runs.)
5 - Dividend Income (income from stocks)
6 - Intrest income (Income from saving or bonds)
7 - Royalty income (Income from songs or books you have written, and trademarks and inventions (whether or not patentable) that you have created.)
8 - Financial instrument income (Income from trust deeds from real estate)
- The path to financial freedom is simply to: BUY ASSETS
"Buy assets that generate cash flow- NOW, not sometime in the future!" Remember how rich dad defines assets: "Assets put money in your pocket, liabilities take money from your pocket." It is just that simple. The more assets you can buy, the more your money will be working for you. - Sharon Lechter
- The point is that your future is yet to be made. You may as well make it up today and make it up the way you want it to be, rather than what you're afraid it might not be.
- Always remember that words are free. If you want to get rich quickly, you need a rich vocabulary. Always remember that there are three basic classes of assets. They are businesses, paper assets, and real estate. Each of these assets uses different words. Each of these assets is like a foreign country with a foreign language. If you are interested in real estate, begin to learn the vocabulary or the jargon. Once you learn the words, you will be better able to communicate to yourself and others in that asset class.
- "The problem is most people live only one reality and tend to think that their reality is the only reality."
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