So you think you know a bit about realestate!

[MichaelV]

For those interested in a bit of a challenge Robert Kyosaki's website www.richdad.com has a couple quizes that might surprise you. Let me just say I found it to be a humbling experience. The Financial I.Q test was fairly easy but the realestate one was, well,........... interesting!

Ps. For those struggling with the terms try www.therealestatedictionary.com/

 

[qaz]

I got 46% without using the dictionary.

 

[D.T.]

Hi,

I disagree with some of those questions.

For example the first one:

"What would be considered "high risk" when determining real estate investment strategy?"
A. Major upgrades B. No immediate cashflow
C. Short term appreciation D. Both A & B
E. All of the above

This is dependent on strategy. For example I would answer C. Some would answer all the of the above and some would say B or D.

Also the third question:
"3. For a real estate investor with only $10,000 in the bank, which of the following opportunities is unattainable?

A. Purchasing a single family residence for $200,000
B. Purchasing commercial real estate for $500,000
C. Purchasing an apartment complex for $1,250,000
D. Both B & C
E. All of these opportunities are attainable."

Again, it says amount in the bank. Doesnt specify how much existing assets / equity the person has. This is typical of american investing vs australian investing.

Theres quite a few other questions there that apply to the american scenario but not to the Australian one.

-Regards

Dave

 

[geoffw]

RK is very much biased towards a quick return. Cashflow is king, but capital growth is nothing.

I agree to some extent (well, because I have some good cashflow properties)- but I think his huge emphasis on cashflow here and now is self defeating.

In the boom time, many people have done well.

But from now, I suspect that many investors will hurt. Especially those (who, like myself) ONLY looked at cashflow and not Capital Growth- but who did get the CG regardless.

RK has probably contributed a lot to Capital Growth, especially in areas with a high casflow.

Thanks RK!

 

[MichaelV]

Geoff,
Did not quite understand what u were trying to say?
I personally do not agree with everything RK has to say but he does make one good point. How many investments can u buy having a negative return.

 

[geoffw]

Geoff,
Did not quite understand what u were trying to say?
I personally do not agree with everything RK has to say but he does make one good point. How many investments can u buy having a negative return.

You have to look at the big picture.

In this forum, there's a lot of different pictures about what is going to succeed. And that also depends on where you are starting from, and where you want to go.

I have a job which pays OK. I enjoy this job- but I would like to work in it a few less hours pa.

And I have some properties which have had some good CF+. But not enough to let me stay at home.

So I have freedom to choose what sort of property I wish to pursue bow. I'm going for highly CF-, high growth.

There's been so many posts in the forum about this great debate.

That's just where I'm going today.

 

[JumJones]

I agree with you GW.

A couple of points-

- RK Actually does take into account CG. He doesnt advocate predicting markets, but does wants people to still perform fundamental analysis on an area before purchasing - get to know the area, walk/jog/drive around it lots, talk to people who live there etc. This is evident an a number of his books, and audio products. His message is that at minimum the investment needs to be able to fund itself - if you have done your due diligence, then when the property appreciates you can draw down your initial investment, and thus leaving you controlling the asset with no money left in the deal. I think he refers to this as using the "house's" money (as in like a casino) - he uses a blackjack/gambling scenario even though I always wondered why!

- I think RK actually advocates ANY strategy as long as you are playing by your rules, you understand the game and are exploiting the niche for all its worth. His strategy is not just property, but cover shares, fixed rate bills as well. Get financially educated, get experience, get out of the rat race.

 

[Tibor]

I agree with JJ. Also would like to mention that this quiz is for the US market where some of the rules (ie negative gearing severely curtailed, rollover instead of selling, tax credits and much better depreciation than we have, etc) will make the answers slightly different in other countries.

Regarding to the question 1,

"What would be considered "high risk" when determining real estate investment strategy?"
A. Major upgrades B. No immediate cashflow
C. Short term appreciation D. Both A & B
E. All of the above "

To me only B is a high risk issue. Lots of people believe that while they are loosing money on an investment as the government allows it to happen with real estate, is a smart way of investing (C). No idea what A is about (upgrade the property? the surrounds? why?).

Sorry, but IT IS GAMBLING. When one's startegy based on a hope that the piece of dirt will increase in value faster than the "investor" runs out of money and calls it investment??? Good luck. Just make sure (hope) you will have a job / equity (to cover your losses) and the government will not change the rules (abolish / reduce negative gearing attractiveness) and that the market you got involved will recover and will bring the bacon home. There is an old adage that cash-flow is more important than profit. A very profitable business can go broke if the cash does not flow, but when there is enough cash to pay for everything, usually the business will succeed.

These are on top of ALL the usual investment risks associated with RE.

I know lots of people went for the cap gain (instant riches). Some will get burnt and allow the smart ones to get richer. Then the same people will complain about how crappy investment RE is.

Of course, it is only an opinion (2c).