Rich Dad's Success Stories: Real Life Success Stories from Real Life People Who Followed the Rich Dad Lessonsby Robert T. Kiyosaki, Richard Doyle, Sharon L. Lechter, Don Leslie
An extraordinary collection of business success storiesall applying the principles from the #1 "New York Times" bestseller "Rich Dad Poor Dad."
An extraordinary collection of business success storiesall applying the principles from the #1 "New York Times" bestseller "Rich Dad Poor Dad."
Read an Excerpt
Rich Dad's Success Stories
By Robert T. Kiyosaki and Sharon L. Lechter
Warner BooksCopyright © 2003 Robert T. Kiyosaki and Sharon L. Lechter
All right reserved.
Chapter OneMoney Matters
ED AND TERRY COLMAN Venice, California
If we watched a movie about 1960s free thinkers morphing into twenty-first-century rent collectors we would have chalked it up as a Hollywood fantasy. But the story is true. Three years ago, Terry and I began to buy real estate. We now own eight homes in three states worth over $1 million. How and why we changed our minds and moved from fiscal stagnation to financial action is, in a very profound way, the story of how many in our generation have changed, too.
Maybe our pre-real estate situation shouldn't have been so surprising. Money had not been a topic of discussion in my house, so I didn't receive any information, much less training, about it. My parents thought I was irresponsible where money was concerned; as soon I got it, I spent it. In contrast, my younger sister, the "responsible one," always saved her money. Education was regarded as a good thing, but I was never told that I needed to get a good education that would lead to a solid job and that I'd be set for life. In order to be a well-rounded person, education was necessary. My sister graduated from college, but after three years at Antioch College, I left school.
While I was growing up in Los Angeles, Terry was across the country in New York. Still, she racked up two years of college in California. We met in 1980, married in 1987, and both of us stayed rooted in the hippie mode of the 1960s and 1970s.
We held on to the conviction that money, the currency of "filthy capitalist pigs," wasn't important. Many in our generation embraced a righteous indignation where money was concerned. Living check to check seemed natural and the ambition to accumulate a lot of money never bit us. "Free love" was the currency of our generation. We knew nothing about finance and we weren't inclined to learn.
Fifteen years ago, when we were in our thirties, we worked in the motion picture production business. I was an assistant cameraman who kind of fell into the industry. My father, a freelance cameraman and director, had asked me if I wanted to give the job a try. My background was in graphic arts and photography and since I wasn't really doing anything at the time I said sure. I didn't see this as a particularly great opportunity or a step on a much desired career path. Work just meant money.
One day Terry came to the set where I was working and noticed the makeup specialist's efforts. The skill appealed to her, and she became a makeup artist, as well as a hand model.
We were hired to do a lot of commercials, which entailed travel and hotels and a rather glamorous lifestyle. Sure, we worked job to job and put in fifteen-hour days, ten or twenty days a month, but the rest of the time was ours. We went to the beach and when we wanted to play tennis that's what we did. Spending money was the goal. We had a great time living moment to moment.
On the surface, this was a very "free" and cool way to live but the reality changed the moment our son, Jake, was born almost fourteen years ago. His arrival was a loud wake-up call. With no plan for the future, we never considered what would happen to us-much less to our son-ten or twenty years hence. We carried more than $10,000 in credit card debt and counted less than $500 in our savings account. We had no goals, no assets, no investments, and no way out of the dire predicament we found ourselves in. "What do we do now?" we asked ourselves.
Terry stayed home with Jake while I worked. Unfortunately, my schedule was crazy. Sometimes I'd be gone for weeks at a time. By the time Jake was old enough to notice I wasn't home and would ask "Where's Dad?" we felt trapped. I couldn't leave the film business. It was what I knew and I couldn't imagine working in any other field even if anyone would hire me. We knew we had to make changes, but where to start? It was time to grow up.
Let me set the scene for you. By 1992, Terry and I, ready to act on our financial future, were willing to try something different. One sunny California morning, I was in a park, pushing Jake in a swing. Another dad was doing likewise. Already there was something different about this day because two dads entertaining their kids at a park on a weekday was unusual.
We began to talk and the man told me he was with the Amway business, which deals with network marketing. It turned out that his sponsorship was in Hawaii, a place both Terry and I loved. When Terry met him and heard about the Hawaiian connection her response was purely emotional. Here was a way for us to get back to Hawaii. We did much more than that. We started to build our own organization but we didn't create a huge downline, that is, sponsor other people in the organization. But something very valuable did come out of this venture. Just when we were ready for it, we learned how to do business. The procedure training seminars, instructions on how to present the plan, sales training, and reading lists containing personal development and success principle books provided us with a terrific learning experience and spurred tremendous personal growth. We started to associate with successful people we could learn from. Mingling with millionaires who shared their wisdom unlocked our minds and cast out our narrow views about finance. How money could be used-in addition to how the world of money worked-was a mind-expanding experience.
The suggested book list was particularly valuable. The Richest Man in Babylon really opened our eyes to the way we were dealing with money. Two years after reading that book all our credit card debt had been eliminated and our savings account held thousands of dollars. How to Win Friends and Influence People was another enormously important book for us. Reading it gave us the tools to deal with others effectively.
Being in the right place at the right time-in this instance the swing set at the park-led to business training. Now we had graduated from the first phase of our financial education. What, we wondered, were we supposed to do next?
Six years ago I became self-employed when I established a service business. We, along with six independent contractors who worked project by project, supervised the transfer of film to videotape for commercial production companies.
Originally I had a partner, who I subsequently bought out in the spring of 2000. With no investment capital to tap into, we ran the business from a tiny back bedroom in our house for the first four years. A computer, fax machine, cell phone, and pager were all we needed to get started. Carrying low overhead was a clear decision and we were pleased with our virtual office, where a twenty-four-hour service outside the house handled our calls.
A real person answered the phone with the name of our business, took the message, and paged me. I returned the call right away. I took care of everything from sales and billing to scheduling, from training to mailing out holiday cards. Doing the bulk of supervising the session was also my responsibility. It was exhausting. A couple of years ago we hired a part-time office person to take over the day-to-day operating functions such as billing and data entry. But even with the roster of associates, who supervised the sessions, I found that I was still required to make a lot of the daily decisions regarding scheduling, personnel, and finances. The question I heard more than any other was, "What do you want me to do about ..."
Hitching a ride on the dot.com express, we took advantage of the advertising dollars available. We did well and figured that we should take advantage of the boom that was taking place in the stock market.
After my grandparents died and left me a few thousand dollars, we invested the money in mutual funds. Five years ago, thinking we were finally taking control of our financial destiny, we converted our mutual funds to individual stock positions.
During the first two years of "investing," our portfolio grew pretty much no matter what we did or bought. At one point it rose 30 percent overall. Over a period of three years, our investments, which included five IRA accounts, totaled $80,000. After doing some rudimentary research we thought we picked solid, reliable companies. We bought shares in companies such as AT&T, Dell, General Electric, DuPont, Kodak, GM, Berkshire Hathaway, Microsoft, Lucent, WorldCom, and a few smaller riskier stocks as well.
Complacent, I didn't monitor our portfolio nearly enough. Nor did I follow closely the financial information the companies were sending me. I didn't possess the education to invest in stocks safely-for instance no trailing stops, that is, an order to automatically sell a stock if it goes below a certain price, were in place. Without an advisor to provide accurate information and insight, we put our money and ourselves in a precarious position.
When the market started to collapse in 2000, I wasn't paying attention. A few months went by and when I next looked at our portfolio it was down between 30 percent and 40 percent. Still I did nothing because I was waiting for the market to recover. I hadn't done my homework, and still hung on to the long-term buy-and-hold mentality. It was a big mistake.
Now our total stock portfolio value is about $46,000, which represents almost a 50 percent loss. This experience taught us a tough lesson. To be successful in any investment strategy, one needs to access correct and current information and constantly monitor the situation. It is also vital to hire an advisor one trusts.
The old saying applies: When the student is ready, the teacher appears. Visiting a friend's home four years ago, we noticed a copy Rich Dad Poor Dad sitting on the kitchen counter. I admit that I didn't immediately react to it although Terry picked up on it right away. She bought a copy and we started reading it.
Three years ago, after we began playing CASHFLOW 101, we attended a seminar on Veterans Administration (VA) foreclosures. The seminar provided a network of brokers and agents in place to help students buy these homes. All were small deals type of housing. When we saw the financial breakdowns, they looked exactly like one of the small deal cards from the game. We said, "Hey, this is a small deal card. We have been doing them for months in the kitchen, why not do it now for real?"
Here's How We Did It
We went to the Internet and, based on the information we received at the seminar, began searching for properties. VA foreclosures required a bid, with the highest bidder winning. They also came with a predetermined mortgage rate. These loans, which were all conventional thirty-year fixed rate mortgages, were very easy to qualify for. When we began buying real estate the rate was 8 percent and over time it dropped by increments to 6 percent.
Initially, our focus was on southern Florida and the Phoenix area so we contacted real estate agents in Port St. Lucie, a bedroom community of Palm Beach, as well as in Phoenix. Our reasoning was this: We were interested in the lowest cash investment required, and those two states qualified. (Each state within the VA program has slightly different parameters. For example, in Florida the VA requires $1,000 down to buy property. In Arizona, the amount is 5 percent of the bid price.)
The Phoenix real estate agent mailed us packets of available VA properties, including photos, along with a breakdown of purchase costs, suggested bids, management fees, expenses, taxes, insurance, estimated repairs, and net cashflow.
The agent in Florida put the same information up on his Web site. We looked at several properties and analyzed the numbers that were provided. Then we played with them with the help of a financial calculator (we bought ours in Staples for about $50). The aim was to determine the maximum amount we were willing to bid and still receive a positive cashflow. When we found a property that we liked, we would put in a bid based on our calculations. If our price won, we were delighted. If we lost it, we didn't care because we weren't willing to pay more for the property.
After making a few bids but losing, we had a winner. This particular three-bedroom, two-bath single-family house in Port St. Lucie was priced at $98,000. Our credit was good, so we knew we would qualify for the loan with no trouble and we knew that we could use money from our savings and stock sales to cover repairs, the down payment, and the closing costs. The fix-up took a few weeks and our agent had a tenant standing by to move in within thirty days.
Yes, owing $33 sounds like we were going in the wrong direction, since we had no cashflow for such a big outlay of time and energy. But to us it represented the potential for financial independence. The indisputable fact was that we owned an income property that our tenant was going to pay for. Recently we refinanced the loan at 6.125 percent, which reduced our monthly loan payment to $579.
We closed on this house in October 2000. In that time the prices for properties in Port St. Lucie have skyrocketed. The house was recently appraised at $126,000, a 23 percent increase in value. Our initial investment of $7,900 bought an asset in which we have $26,000 worth of equity (the appraised value minus what is left to pay on the loan). If we sold the house today for $126,000, then that's a whopping 329 percent return, excluding annual cashflow.
"Wow," we said to each other. "We can do this again." And that's what we did, repeating the same process. Something wonderful was happening. By converting earnings and paper "assets" to true assets that were providing cashflow and equity, we were taking control of our lives in a totally new way. Excited and motivated, over the next two years we won the bids on three more properties, one in Clarksville, Tennessee, and two more in Port St. Lucie. Because one of the Port St. Lucie homes was not financed by the VA, we had to find our own financing. Through the agent in Florida we contacted a loan agent for a local bank. We qualified for a conventional loan with an interest rate of 6.75 percent with 5 percent down. Because the VA was not financing this house, the number of bidders dropped, and our bid of $60,600 won the three-bedroom, two-bathroom home.
We closed on the property in December 2000. This house, based on similar properties in the area, is worth about $82,000-and that's a conservative estimate.
We located a single-family VA home in Tennessee, again over the Internet, for $500 down on a price of $78,000. This time, the agent, who sent us pictures of several homes, had a harder time finding a tenant. The fix-up costs, which came to nearly $3,000, were more than anticipated and the taxes were higher than estimated.
Excerpted from Rich Dad's Success Stories by Robert T. Kiyosaki and Sharon L. Lechter Copyright © 2003 by Robert T. Kiyosaki and Sharon L. Lechter. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
Meet the Author
Robert Kiyosaki has challenged and changed the way tens of millions of people around the world think about money. With perspectives that often contradict conventional wisdom, Robert has earned a reputation for straight talk, irreverence and courage. He is regarded worldwide as a passionate advocate for financial education.
- Phoenix, Arizona
- Date of Birth:
- April 8, 1947
- Place of Birth:
- Honolulu, Hawaii
- B.S., U.S. Merchant Marine Academy
and post it to your social network
Most Helpful Customer Reviews
See all customer reviews >