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

The Secret of the I Quadrant
The secret of the I quadrant is OPM: other people’s money. As you 
know, many people invest, but they use their own money.
To be a true I, a person needs to learn how to use OPM to invest, 
either from banks, pension funds, or private investors.
A smart investor can use OPM in any asset class, including stocks, 
precious metals such as gold, and commodities such as oil. OPM is the 
secret of the I quadrant, regardless of asset class. Once you learn the secret, 
you will see it used everywhere.
When Kim invested in her first house, she put down $5,000 and 
borrowed $40,000. The moment she did that, she became a true investor, 
using OPM to invest. When I used my credit card to buy the $18,000 
units on Maui, I was using 100 percent debt to finance my investments. 
The moment I did this, I moved into the I quadrant. 
When Kim and I invested $1 million with Ken and Ross, we did so 
because their business plan was to use bank money to get our money back. 
If they said we had to leave the $1 million in forever, we would not have 
invested. We got our $1 million back in three and a half years. We use 
OPM as much as possible because we want our money back, plus we want 
to keep the asset, plus we want the cash flow, and we want tax advantages. 
That is what true I-quadrant investors do.
When I invest in oil, I use OPM from the government and from the 
oil companies to buy my oil wells for me. When I invest in stocks, I use 
options and market momentum to buy my assets for me.
My rich dad often said, “Only lazy and foolish people use their own 
money.” OPM is the secret of real investors. 
You get to take the deduction for amortization even if the bank loaned you 
the money to pay the fees.
These tax benefits are yours even though the property may be appreciating, 
or going up in value. So real estate gives you benefits through depreciation, 
amortization, and through appreciation in value.
There are additional tax benefits as well for real estate investors. When 
you sell your real estate, you have a choice on what you pay in taxes. If 
you decide to cash out, you can pay tax at the low capital-gains rate on 
any appreciation in your property. If you decide instead to use the proceeds 
from your sale to invest in another property, you can pay no tax. This is 
called a “like-kind” or 1031 exchange. 
What’s more, if you sell your property at a loss, you get to take the loss as an 
ordinary loss. This means that you can use the loss to offset any other type 
of income. This is quite different than if you were selling a stock or mutual 
fund, where a loss would be limited to offsetting gains from other capital 
assets. So if your property appreciates, you pay little or no tax, and if your 
property loses value, you get to use the losses to offset your ordinary income. 
Many countries have similar rules and tax rates on the sale of real estate 
and other business assets.
Can you begin to see how the tax laws provide stimulus to real estate 
investors and business owners? (By the way, in the United States, flippers 
get none of these benefits and in fact, have to pay an additional tax, called 
self-employment tax, that investors don’t have to pay.) The tax laws are 
directions from your government on how they want you to use your money 
to improve the economy. This is especially true when you are using debt to 
invest in real estate and business. 
I’ll let Robert share some more ideas about using debt to invest.