Again, I was already intimately familiar with the foreclosed properties 'strategy'. You've provided nothing particularly new or interesting.

There certainly are deals to be had by purchasing foreclosed properties--hence their popularity with investors--but your claims of routinely buying at 80% below cost and selling the next day for a 300% profit are ridiculous.



Are you saying that you aren't Friend14? Given that you switched accounts in the middle of this thread, I simply assumed that you were the same person.

Wow, this thread has gotten pretty big. Sorry for not updating you all sooner, but I decided to just keep the money in the bank. I had a feeling there was nothing I could really invest in without making the money hard to get or possible to lose.

I just have one question about this:

"all you have left are the big liabilities that cost you money, like your car and the house you are living in"

Wouldn't your house be an asset? I mean sure it costs money to maintain but its still an asset right?

No. According to Kiyosaki, A true asset puts money in your pocket. A true liability takes money out of your pocket. It's as simple as that, but it tends to get a bt more complicated when you apply the principle to things IRL.

The way to find out if something is an asset or liability is to see if the item gives you enough profit to offset it's expenses to make a positive cashflow. If it does, then it is an asset. if it doesn't, it's a liability. I would consider an item to be neutral if it operates at the break-even point, but this rarely, if ever, happens.

Anyone with real wealth knows the difference between an asset and a liability very well, b/c their wealth depends on it. The rich make a practice of acquiring assets, while the poor and middle class make a practice of acquiring liabilities. (Obviously, you have to buy some liabilities such as food, but only big purchases are relevant to what I am talking about here.)

So, to answer your question---No, a house you are living in is not a true asset.

On non-crazy world where I live, ****ing food is not a liability. It is a much-loved life-sustaining asset.

Although food is 100% critical, it is technically a liability since it doesn't make you any money. Buying liabilities is inevitable if you want to stay alive, but the difference between rich and poor is that the rich buy mostly assets as their big purchases (and profit ensues since the rich steadily get richer by acquiring more assets. When the rich buy big liabilities (like cars or yachts) , they generally other have other people pay for them), and the poor and middle class buy mostly liabilities as their big purchases. (and these people must then struggle to pay for all these liabilities, strtching their meager income even thinner.) See how this works?

Assets are things you own that have monetary value. A house is an asset. Everything you own is an asset, whether it makes money or not. If you can use it as collateral (e.g. a house), it's an asset.

None of those things are an income-producing asset unless you sell them. The things that I refer to as true assets tend to appreciate, while most of the stuff that you think are assets will depreciate. (like how new cars lose a big percentage of value the minute they leave the lot) In that way, it costs you money, making it a LIABILITY.

Whatever, dude. Try not mangling the definitions of words when you're talking about things. What you're talking about are not assets. They're a special subset of assets.

Indeed. The real world definitions, in which a house is an asset, its mortgage a liability, are apparently sufficient for every single accountant and business in the world.

Dumbing down cash flow statements and balance sheets into one metric isn't particularly intuitive or necessary, but it does make for a great tagline: "Rich Dad Poor Dad will challenge the belief that your house is an asset!". And at least Kiyosaki's redefinitions sort of almost make sense, unlike his numerous misleading, incorrect, and illegal claims.

what evidence do you base this on?

it's best to completely regard the dictionary definition of asset and liability and instead apply Kiyosaki's definitions to the terms.

Misleading/Incorrect: "A corporation can do so many things that an individual cannot. Like pay for expenses before it pays taxes."

So can a sole proprietor.

Misleading/Incorrect/Illegal: "For example; by owning your own corporation - vacations are board meetings in Hawaii. Car payments, insurance, repairs are company expenses. Health club membership is a company expense. Most restaurant meals are partial expenses."

So can a sole proprietor. But have fun convincing the IRS that vacations to Hawaii and health club memberships are necessary and ordinary business expenses.

Immoral & Illegal: "In real estate, I make an offer with the words "subject to approval of business partner." I never specify who the business partner is. Most people do not know my partner is my cat."

This probably does work well, since a seller stupid enough to accept an offer "subject to approval of business partner" would likely just back out of the contract with no questions asked. But I'd pay good money to watch if the dispute went to court.

And there's plenty more of the same crap. But seriously, the guy is suggesting duping people by inventing a business partner. How did that not set off some warning bell in your head?

Re: the whole ficticious partner thing: It's called leverage. Leverage is everything in business deals. If you don't have leverage, invent some. It's really no different than bluffing in poker. You are under no obligation to play it straight or level completely with the seller until you actually sign the contracts. Try to see how far you can push the seller before the deal, b/c you can get more that way. If you make this stipulation, a seller probably won't back out if they have an interest in getting rid of the property. You would be surprised at how far motivated sellers will go to be out of a property.


A lot of people have partnerships in business, so it's not all that unusual to want to consult with your partner before you seal the deal. Of course, the fact that your "partner" is a pet, a houseplant, or something like that is beside the point. The whole point of this is to give you a chance to back out if the deal doesn't look like its going to go where you want it to. It's simply a means of escape for you, nothing more. If the deal is going great, there is no need to consult your "partner", since your "partner" already approves of the deal. See how this works?





Also, re: using vacations as business expenses, I would look more into it before I try it. When I get involved in this, I plan to make a practice of having a trusted attorney (whose interests apart from law are similar to my interests) specializing in business and real estate law on my rolodex so I can call him up when issues like this come up.

But if there's a legal loophole that lets me get away with it, its all fair game. If I recall correctly, the rule is this: (as this might have changed) As long as anything related to your business happened on the trip, your trip to Hawaii is covered as a business trip. The fact that you stayed a few days longer than you had to and spent the extra time on the beach is your business.


In regards to corporations, that may be true about the sole proprietorship. However, there is still more advantages to incorporating. Having all of your stuff owned by a separate legal entity (which you happen to fully control) is damn useful b/c we live in a litigious society and people are always going to try to collect on your stuff. If they sue you and you don't actually own anything of real value, what do they get? Nothin'. They didn't sue your corporation, so they can't touch your stuff since it's all owned by the corporation, you merely use it. If they turn around and sue my corp. b/c of that, they wouldn't have a case since my corp. didn't do anything to them. The same thing is good in a divorce. If all my stuff is in a corporation, the ex isn't getting s*** from me since she didn't marry my corporation, and she can't touch the items owned by the corporation even though I can.

A purchase offer is a contract.

And really, just think about it: If it weren't a contract, why exactly would he need an "escape clause"?



Only the business portions of a trip are deductible, and only then if the trip meets the IRS's "ordinary and necessary" guidelines. Kiyosaki is suggesting that you can do whatever the hell you want as long as you justify it as something remotely related to your business.



And this has what to do with the fact that Kiyosaki was plainly wrong about individuals not having the ability to deduct business expenses?

I'm gonna hire you as my financial advisor, Page.

not unless it's in writing. These days, an agreement doesn't mean s*** unless it's in writing, and signed by both parties, preferably with a witness present.

Even if your purchase offer is a literal contract, that's no problem, b/c you need only insert the escape clause, and you can declare it null and void if your "partner" doesn't like the deal before the final negotiations. Remember, deals can sour while they're still on the table, and this gives you a chance to bail before you get caught holding the bag. I write my own contracts for my web design business so adding an esape clause is always easy. The escape clause allows me to back out of a deal even if the seller is interested before any final paperwork is signed. remember, it takes two fully willing people to make a binding deal, and adding a stipulation before any business is done helps eliminate any hang-ups and potential disagreements, lawsuits, etc.




Again, consult a lawyer and check for loopholes. The laws are full of them, and it is definitely in your best interests to look for them.



You misunderstand. Corporations have the ability to pay for their expenses before they have to pay tax on their income, meaning that if you are the guy behind the corporation, you can pay yourself first. Again, check the law. Individuals and employees can't do this, hence the reason why they get screwed with withholdings and end up having to pay everyone else first.

...a purchase offer is in writing, typically a dozen or more very boring pages worth of it. Would it kill you to learn the fundamentals before engaging in an argument?

Since you missed it the first two times, an "escape clause" based on a nonexistant entity is fraudulent. If the seller sues you for breach of contract, you will lose and probably pay a ton of punitive damages.

And what the heck are "final negotiations"? You put in an offer, the seller agrees to it, and then you're legally bound to purchase the home contingent to the terms of the contract.



This is supposed to be some kind of rebuttal? "Oh, but he might be right because there could possibly be a tax loophole or something, even though the tax laws and tons of IRS case law say he's wrong!"



A sole proprietor, who by definition is an individual, has the same ability to pay his business-related expenses before taxes. An individual who buys and sells real estate need not incorporate to pre-tax his business expenses.

I'm going to hire Argath as my financial advisor. He seems to know what he's talking about and far more sensible than pagewizard. We'll see who does better financially, JG.

But seriously Page. You honestly view business as a game like Poker? You don't just bluff imaginary leverage into existence, it's unethical and many would say immoral. Not to mention surely illegal in some way (I'm no lawyer though).

I write all my own contracts and legal documents. I go out of my way to make it easy for all parties to understand. There is no reason why a ducument has to be written in jargon and convoluted language that only a lawyer could understand.



Be that as it may, I could still use an escape clause, but without a nonexistant entity. I'm still not convinced that it is fraudulant (to the point of being illegal) , maybe you could prove it to me by producing the exact law that states it. It is slightly deceptive, but that's what you have to do sometimes to get leverage. My knowledge is an amalgamation of Robert Kiyosaki, Donald Trump, and Russ Whitney, I'm going by what I have learned from them.

Okay, you also say that a sole proprietorship offers tax benefits as well. That's all well and good. However, I highly doubt that it offers the same legal protection as a corporation. Although oyu control your corporation, you are still a different legal entity, which is why a corporation protects you. If you are a sole proprietor, everything is still in your name, so it can be taken from you by means of litigation.

It is a game. It's buyer vs. seller. Some people know how to play it better than others. As far as legality goes... you may be surprised. Rich people can be incredibly devious and can get away with a lot of things and still keep it legit.

And that makes them exploitive ******* pricks who no one likes.

That may be true, but they're damn smart and/or clever for knowing how to exploit legal loopholes. If you can get the upper hand w/o cheating, more power too you.

Yes. Did I ever say that you couldn't?



You seem to be missing the point. Kiyosaki claimed that only corporations can deduct business expenses. That claim is false.

Kiyosaki isn't infallible. Hell, no one is. Most of what he says is true, though.

You still have to prove to me that using nonexistant entities in an escape clause is illegal. You brought it up, now lets see the goods, if they exist.

While never using it myself, I have heard "stories" (don't know if they're true or not) of old ladies stating "Me and Mr. Whiskers talked it over and decided it would be in our best interest not to purchase the house."

Personally, I see nothing wrong with this. The legal procedure for purchasing a home automatically puts the buyer at a disadvantage. Things can be revealed in a second inspection, for example, that wasn't found the first time. Buyers need a way out. A seller doesn't lose anything because a buyer decides to back out of the deal (except the sell itself).



I wasn't providing it solely for your benefit. Additionally, you obviously didn't even visit the links as none of them really describe any sort of "strategy." They were links to a variety of informational articles as well as foreclosure listings by state->county->city. Of course, you would have known that if you had actually taken the time to visit the links...



I never stated anywhere about my example (in which I clearly stated as such) was routine. Those are my "emergency" or "quick cash" houses. It would be foolish for me to use them all up. If anything were to happen and my investing cash dropped to under 10k, these would be the house I'd have to use to build myself back up again.

Secondly, I didn't say I purchased at 80% below cost. My example showed that I can purchase at 80% below market value. What I pay for those type houses are generally only 5-10% under the "appraised" value. While these low cost houses aren't abundant, under appraised houses are.

In your opinion. I respect them b/c they use their heads and don't let themselves pay extra tax out of fear of the IRS like nearly everyone else does. I still view the IRS as a group of thieves specializing in legalized extortion, but the IRS is a lot like the bully that may have hassled you in grade school. If you are afraid and pay up out of fear of an audit, the IRS and everyone else will push you around for your whole life. However, if you have the balls to stand your ground and look for loopholes, you can take huge deductions. I'm not afraid of the IRS. Even if they do audit me, I would have time to talk to my lawyer and prepare a list of the legal loopholes that I used. Once the IRS sees that no laws were broken, ,they must back down or THEY would be in trouble.

Intentional misrepresentation or nondisclosure of a material fact is grounds for a breach of contract suit. But even assuming that the fabrication of an entity on which the contract's validity is based is immaterial, a contract must be performed in good faith.

Bad faith use of legitimate contingencies, like attorney-approval or financing, may constitute a breach of contract. Inventing a business partner is bad faith per se, so it has little chance of legal defensibility.

That still doesn't prove that it's illegal to do it. Is it sleazy? Yes. Deceptive? Yes. Would a smart seller try to pull something equally devious on me to ensure they get the best deal? Probably yes.


Dealing is an art.


I'm not saying that it isn't underhanded, but it isn't a breach of contract if an escape clause is in there. If the seller signs the contract, that means that they agree to all of the terms in the contract, (including the presence of an escape clause) AND the possibility that I might invoke the escape clause if it looks like I'm going to get screwed on the deal.

Like CaptBevvil confirmed, things can go wrong on a deal, and NOT having an escape clause would put me at a disadvantage. This escape clause evens the odds. It simply allows me to withdraw my proposal without being sued. It doesn't cost the seller anything other than the money they might have made on the sale.

This is exactly why I think of it as a game. The object of the game is to get the best deal, and buyers and sellers are competing with each other to get it.

Once again, I neither said nor implied that "escape clauses" in general are not allowed.

Provided that you do not intentionally misrepresent some material fact or act in bad faith (e.g. creating fictitious business partners, intentionally sabotaging your financing), you can include whatever contingencies you want. Now if you seriously believe that inventing a business partner isn't a bad faith gesture, I suggest doing some independent research.

So you want me to do all the research to help support your claim? I have a better idea: how about you do the research in contract law and present your findings to me. It's your claim, you have to prove it, not me.

you claim that using a ficticious partner is

1. a bad faith gesture
2. an intentional misrepresentation of fact.

You also claim that this is grounds for a breach of contract lawsuit, I want to know why you believe that. An escape clause in which I consult a business partner does not create a just cause for a breach of contract suit if i put the clause in the contract (complete with the ability to consult partners) and the other party agrees to the condition by signing the document. I could then invoke that and still keep the terms of the contract, so if the seller sues me over breach of contract after I use the escape clause, the seller would have no case. Legality is beside the point, since you have not given me any legal evidence to prove that using a ficticious partner is illegal in and of itself. If it is illegal, prove it to me by showing me the law that says so. All you have stated so far is that it opens the door for a breach of contract lawsuit. The fact that it may open the door for a lawsuit does not make it a crime in and of itself, and therefore leaves me free to do it as an action within my legal rights.

It's a violation of contract law, not a criminal infraction. Contract-related fraud can also be tortious in some states.

If you want independent verification of anything I've said, find a copy of the ALI's Restatement of the Law, Second, Contracts.

I know someone who has been doing this type of real estate investing for awhile and owns several properties. He's the one that got me started in this, and has been giving me one-on-one advice to fill in the gaps that enevitibly come up from what i've learned from Whitney, Kiyosaki, and the others. . I'll see what he says about it.