What Schools Will Never Teach You About Money By Robert T. Kiyosaki

Paid off old loans:
$13.5 million - $10.0 million = $3.5 million
Return to investors:
$3.5 million
Net transaction:
Kim and I invested $1 million.
From the $3.5 million return to investors, we received $1.4 million. 
$1.4 million is reinvested in a 350-unit property in Oklahoma.
Taxes on $1.4 million:
0
Today, Kim, Ken, Ross, and I still own the 252 units in Tucson. We 
receive monthly income from the property. Since we have zero invested in 
the property, our ROI (return on investment) is infinite.
Over the course of seven years, Kim and I have invested in over 
2,500 units with Ken and Ross, using the same investment strategy. 
Today’s economic climate has offered us opportunities to buy even more 
properties because prices are low and, more importantly, interest rates are 
very low. Low interest rates increase our income as rental income goes up. 
Rental income is going up because fewer people can afford to buy their 
own home, so they rent.
During the real estate bubble between 2005 and 2007, Kim, Ken, 
Ross, and I were losing renters because they were using subprime 
financing to buy homes they could not afford. During that bubble, we 
actually made less money. But once the bubble burst, the tenants flowed 
back in, our cash flow increased, and our apartment properties increased 
in value as the values of residential homes plunged.
When banks look at large, multi-million-dollar projects, they focus 
on the borrower’s track record and the property itself. They make their 
lending decision primarily on cash flow, not the borrower. 
When homeowners buy their home, banks focus on the borrower 
and the homeowner’s income because there is no income on a
personal residence. 
Net income (monthly) $200
Down payment $20,000
= 1% per month, or 12% per year

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Chapter Three
Unfair Advantage
109
108
Great wealth is founded on the use of debt. There is good debt, and there is 
bad debt. 
If you borrow money and spend it on something that goes up in value, 
that’s good debt. If you borrow money and spend it on something that 
will go down in value, that’s bad debt. You use good debt to enhance your 
situation and increase your net worth. You should avoid bad
debt altogether.
Debt is leverage. Everything you use it for will be magnified, good or 
bad. If you borrow money for a liability like a car that will eventually 
be worthless, you are magnifying your cost negatively. Bad debt creates a 
liability that takes money out of your pocket. 
Using debt as leverage can also be an extremely positive experience when 
you are buying assets. 
My business uses debt and leverage to create wealth for my investors by 
purchasing assets, specifically multi-family property. These properties not 
only produce a monthly cash flow, but they grow in value over time using 
sound management principles. 
A good example of using good debt and leverage is when a group of 
investors, including Robert and Kim Kiyosaki, bought a 288-unit property 
located in Broken Arrow, Oklahoma, a suburb of Tulsa. This property was 
well located, and we had several opportunities to increase the revenue and 
decrease the expenses. 
At purchase, the property appraised for over $14 million. Value is always 
based on the net cash flow. Using the appraisal, the bank allowed us to 
assume the first mortgage of $9,750,000 at 4.99 percent interest rate. We 
also applied and were approved for a second mortgage of $1,090,000 at a 
6.5 percent interest rate. This is an example of good debt.
The bank gave us these loans because the property had a high occupancy 
rate, and they knew the rents we would collect from the residents would 
more than pay the monthly mortgage payments.
We raised $3.4 million from investors for the down payment and for 
capital needs.
To most people, $200 a month, a 1 percent monthly return, looks sickly, 
certainly not exciting. Yet if you own 100 of these small deals, that is 
$20,000 a month in cash flow. And 1,000 properties is $200,000 a 
month. That is more money than most doctors and lawyers make in
a month.
When Kim started out, her goal was 20 units. She accomplished that in 
18 months because the economy was terrible. It’s not that different today.
Once she had her 20 properties, she sold them tax-deferred. With her 
tax-deferred capital gains, she purchased two larger apartment houses, 
one 29 units and one 18 units. Today, following the infinite-return 
formula, she has nearly 3,000 apartment units, commercial buildings, a 
luxury resort and five golf courses—all with positive cash flow, even in 
down markets. Her goal is to add at least 500 more units every year, using 
the same formula—the formula most real estate agents say does not exist. 
This difference in mind-set underscores the difference between real estate 
education in the S quadrant and the I quadrant. The real irony is that 
real estate agents pay taxes on the income they earn, and investors receive 
massive tax breaks on their income.
On most of our investments, we have no money of our own in the 
property. If we do have money in the property, we are always in the 
process of getting that money back. In most cases, it takes a year to five 
years for our money to return.
Once we get our money back, we move it to acquire more assets. This is 
a formula known as “the velocity of money.” I wrote about the velocity 
of money in greater detail in Rich Dad’s Who Took My Money? Why Slow 
Investors Lose and Fast Money Wins!, published in 2004. Our formula has 
not changed, and it has picked up velocity in this horrible economy. If 
you had taken the action suggested in Who Took My Money? before the 
crash, you might be getting your money back today.