Friday, December 28, 2007

Lessons from December 26 Monopoly game

This wasn't a Cashflow game, but Monopoly. Actually, Simpson's Monopoly which takes a little getting used to.

Playing with me were my Nephew Paul and two others that will remain nameless. You'll see why shortly. Read to the end for the lessons learned.

Because it was late when we started, we played the short game, passing out 3 deeds to each player. One deal was done right then with cash and deeds being exchanged.

It's amazing when you play a game like Monopoly or Cashflow. The same neurosies that people exhibit when doing deals and even thinking about them come out. So does all of the negative thinking and the comments about greed and one person getting rich at the expense of the little guys.

One of the nameless players wasn't able to buy another deed for a number of turns, either landing on owned properties or Chance or Community Chest. She was stock piling money. The other nameless player left the game for about 20 minutes without saying anything and the first nameless player wanted us to stop and wait. Oh, boy, the world just stops. As it turned out the 2nd nameless player did quite well while gone, making cash and buying several properties.

Neither nameless player was willing to do deals that improved their position even when they gained more than the other player. Paul was finally able to trade a deed and cash to one of the nameless players that gave both of them a monopoly around the corner of Free Parking. The nameless player, despite cash refused to buy houses.

I'd been dealt the Simpson's equivelent of Park Place and then I landed on and bought Burns Manor (Boardwalk). The two nameless players insisted that whoever owned Boardwalk "always won". Then the both actively tried to sabotage the game. It was frustrating. At this point, this was the only monopoly on a color group I had so I started buying houses because I had the cash. Paul ended up with the two cheapest properties and spent the $500 and had hotels on each. The nameless ones complained. The namesless one with fewer properties landed on Park Place with two houses; she had the cash to pay the rent but just quit. The the other nameless one did. The first one to quit basically sold it all back to the bank and I got paid out of the proceeds.

Paul and I continued and I definitely had more property. He kept landing on my properties with a lot of houses or hotels. In lieu of cash for rent he offered deeds which I took. This was a mistake which I'll detail later. Then the unthinkable happened. He was down to the 3 red properties just past Free Parking and had one other deed. But he was slowly adding houses and then hotels to the 3 reds. I had hotels and houses on all of my monopolies and owned all but Paul's and the remaining 2 unsold properties. What was the unthinkable? 10 straight times around the board, Paul landed on none of my properties and I landed on his houses and hotels. Just one of the red properties made over $4K. Not bad considering that 4 houses and a hotel on that property cost a total of $750.

I was unwilling to part with properties so I was mortgaging them, selling houses back, etc., raising cash to pay the rent! I even had to pay Fat Tony's protection (real game, IRS taxes of $200 in the short game) 6 out of 10 times passing go during the same wave of no income from Paul and consistently landing on his hotels.

Finally, he landed on Park Place when I'd stripped it and bought back 3 house and I missed his hotels a couple of times. We quit after a couple of hours, adding up the cash, the property we each owned (1/2 retail for mortgaged properties) and the retail price of houses and hotels. I was leading by about $1K and we decided that I'd role just to see what I'd land on. Yup, one of Paul's red properties with a hotel. That would have meant that he had more net worth.

Essentially, it was a draw although through attrition I expect that I'd have "won".

Now for your reward since you stuck it out and read the whole post:
1) Ask why other people are involved. Really asking ahead of time would probably have helped me determine not to get involved (in the game) with the two nameless people. They really didn't want to play as it turned out and they tried to sabotage the game.
2) While sometimes accepting a deed for payment can be good, I should have taken cash. Paul would have been forced to mortgage or give up properties and would have been stretched much thinner. I'd have had more cash.
3) Keep more cash on hand. I was putting houses on properties where the odds were good Paul would roll and land on them right away. He kept avoiding and I kept having to sell back houses to pay Paul the rent.

So was this a waste of my time? Nope, I still learned something and the frustration was part of the lesson

Wednesday, December 26, 2007

Lessons from December 8

With the holiday season approaching, we had a smaller group of 4 playing. In attendance were myself, James Greelish, Mike Marques and Bob Kay.

Sorry for the long delay in posting. For most of the month, I've been feeling poorly, since returning from my most recent trip. As a result, too much time has past for me to really talk about what lessons were learned. I'll strive to do better.

Next games

The next games for the Twin Cities Rich Dads and Moms Cashflow club are this Saturday, December 29, 2007 in Fitchburg, MA and January 12, 2007 in Leominster, MA.

We'll have a speaker on January 12 talking about building wealth for families.

To find out more, visit our website and signup for the newsletter.

Happy Holidays!

With the holiday season upon us, I want to wish all of you a joyous time at Christmas, Channukah, Kwanzaa or whichever holiday you celebrate. I welcome each and every one of you and value you contributions to the group, whether you are a casual reader or play Cashflow with us monthly.

Wednesday, November 14, 2007

Lessons from November 10th 2007

Another great game, another big crowd. We had 12 people on two boards. Playing Cashflow 101 were Greg Aldrich, Lee Johnson, Danielle Rocheford, Mike Marques, Sue Sudhalter and first timer PJ Gauthier. Playing Cashflow 202 were James Greelish, Terry Fairley, Mark and Sean Biller, Bob Kay and returning after about 6 months was Aaron. Welcome back, Aaron!

We rapped up the night much earlier than usual, about 9 or 9:30 because a number of us had to get up early the next day.

On the Cashflow 202 board, Sean Biller got out of the Rat Race first. I'd like to point out that Sean normally gets out first or second every time he plays and he's still about 2 months shy of his 14th birthday. We're all pretty proud of him.

On the Cashflow 101 board, we saw all kinds of strategies.

Mike was a mechanic and played tighter (to borrow a poker term) than I've ever seen anyone play. He essentially did no deals except for borrowing to buy 5000 shares of stock at $1. He had to borrow more because of getting downsized and played most of the night with just over $200 cash flow per month. Mike drew small deals the entire time until the very end, hoping to flip them for cash.

Greg was the cop and played what I used to call aggressive. He bought everything essentially that came up, whether he drew it or someone else did. He watched his money well and always borrowed to have cash on hand so that he didn't go bankrupt. He had a lot of property, some businesses and over $400,000 in bank loans. Because of his willingness to finance 100% and not worry about negative cash flow, Greg was largely uninterested in partnering although I did get him to go in 50% on a shopping center that I couldn't do alone and didn't want to sell the opportunity for. Greg never drew a small deal card.

Danielle played the doctor, avoided most deals and usually partnered. She always kept at least $2000 cash flow. I believe she used her high cash flow to cover bank loans on only one deal.

I don't recall the occupation that PJ had. She played pretty tight and hid low cash flow most of the night.

Sue I think played the nurse and started out playing tight. As the night wore on, she was willing to do more deals including financing the cash flow. What was interesting is that the more she did this, the more nervous it made Mike.

I played the engineer and frequently financed deals from cash flow and also partnered with others. Tonight, every time I'd pay off the bank loans, I'd end up with another because of a good opportunity and never paid off the credit cards and retail debt. But I was fine with that. I a couple of Big Deal properties that I partnered on (a 4 Plex with Danielle and a shopping center with Greg) and controlled and i owned an automated business. I was focused on keeping my cash flow up by paying bank loans down immediately. After all, I could always take another loan and in the mean time, who on earth would I want to pay 120% annual simple interest to the bank?

Greg got out of the rat race first and he won the game. Both actions required some luck. Within a couple of player turns, a plex buyer appeared offering $35K per unit and Greg sold all of his plexes. This substantially dropped his debt. Then a house buyer appeared at $100K per house. Greg sold a number of them and he was out with a 1.14M Cashflow day! On his first roll on the Fast Track, he landed on his dream and had more than enough cash to buy it.

Foreclosure filings continue skyward

There continue to be an increase in foreclosure filings nationwide. The below link is from CNNMoney.com. Despite mispelling Worcester, it lists the Worchester (sic) area increasing by 122%, or one foreclosure filing for every 150 households. From the standpoint of homeowners (and government) this is horrible. And believe me, I feel for these people. From the standpoint of a real estate investor, this represents great opportunity. Many of these homes need work and offer the opportunity for undermarket purchases and forced appreciation (rehab). Looking for these opportunities? Look for more things such as the auction of Countrywide REOs some of us attended this past weekend.

Foreclosure Filings: No slowdown yet

Tuesday, November 6, 2007

Election Day 2007

So this post has nothing to do with this blog?


It has everything to do with the blog. I want to influence the world, just like you do or should, so that it reflects your world view, is better for you and your family and makes the world a better place. What I'm not going to do in rail against the state of politics locally, statewide or nationally. I've got a pretty clear reputation among those that know me well and those that don't commonly assume incorrectly because of my business background.

I know who I plan to vote for and who I support even in towns where I don't live or live any longer. Fitchburg is a place I'm interested in and I know who I support for mayor there. And I support the re-election of a councilor in Chelsea and Cambridge.

If you are interested, pay attention. It affects, your money, your family and your life. Even if you disagree with my politics or some of my politics, pay attention. Contribute to the candidates you support. Make a difference.

That's how we make a better world.

I'm going now.

Friday, November 2, 2007

Build your own online affiliate business

I've said periodically that I would share some of the "SpareTime Co" things for the business in the basement kind of thing for the different businesses I'm pursuing. Today, here's a little bit of affiliate type stuff. They include lots of things to get you started.

The following cost nothing to get started. You can promote through a web site, email, print, etc. and are available with one sign-up through Revenue Allies Affiliate Network. You can check out 4 of the programs below.

The various ones offered currently through Revenue Allies Affiliate Network are: LHP Home Warranties (heck, buy one yourself through your own affiliate link and get paid for it if you are selling real estate), DISH Network, DIRECTV, Comcast, ADT (just starting), and Vonage!

::LHP Home Warranty Program::
Offer the most comprehensive home warranty service plan available.
More Info: http://www.libertyhomeprotection.com?kbid=6839
Signup: https://www.libertyhomeprotection.com/resellersignup.aspx?kbid=6839

::DISH Network::
Earn up to $145 or more offering the best in satellite television entertainment.
More Info: http://www.revenue-allies.com/up.asp?id=6839

Earn up to $145 or more offering the best in satellite television entertainment.
More Info: http://www.revenue-allies.com/up.asp?id=6839

Earn up to $105 or more offering COMCAST's triple-play service bundle: Internet, Phone & Video service
More Info: http://www.revenue-allies.com/up.asp?id=6839
Because they're offering such high payment on exclusive offers, they are only allowing a select number of affiliates to join. I wanted to let you know before they stop accepting new members.

To learn more about the Revenue Allies Affiliate Program, go to:

This particular program is excellent for landlords, property managers and real tors because these services are needed by every home owner and tenant. And you can include them with your welcome package.

Another feature is that it's a two-tiered program. If people sign-up to offer these to consumers from your link, your sub-affiliate will still receive what they are supposed to and you'll receive about $20 per customer they sign-up.

One sign-up gets you into all of these programs.

More affiliate stuff soon. Try it out; try many affiliate programs out for things that make sense for you. You do have some effort to put into it but you can develop a stream of income from it. Then you can put this money to work for you to get out of the rat race.

Thursday, November 1, 2007

Google Adsense

One of the ways I'm monetizing my various online presences is through the use of Google Adsense. Okay, to date, as of November 1, 2007, I've made only a little only $30. But revenue from clicks is increasing as the search engine rankings of this site, Rat Race Escapes Beko Investments are climbing. Rat Race Escapes, Beko Investments and Worcester REI rank higher than any other real estate investor related web sites in New England according to Alexa because of search engine optimization work I've been doing and I'm pretty please by that. That translates into more traffic and more revenue. WREI has not being monetized yet and won't for my personal gain; rather it will be to bring in more money for WREI so that it can provide a better experience for members and meeting attendees.

Anyway, check out Google Adsense.

Wednesday, October 31, 2007

I signed up for PPP!

I did. What's PayPerPost you ask?

PayPerPost is a way to monetize your blog. You can make money by posting about something that is sponsors. If I had to claim I liked the product (like celebrities on TV) when I didn't I WOULDN'T do it. You just have to post honestly about whatever the product is, even saying why you don't like it. That's pretty cool. What's better,
PayPerPost even pays you for your first post. Yes that's right, they're going to pay me $20 for 200 words in this post.

Why would I do this:
Well, as many of the people that know me, especially the ones that attend Twin Cities Rich Dads and Moms Cashflow Club events and play Cashflow 101 and Cashflow 202 games both here in Leominster and in Fitchburg, know that I've been building an online business to monetize my online activities, separate from my other businesses. This includes things like ethical affiliate marketing (no spam, opt-in only) for a variety of things, use of Google Adsense

and now PayperPost.

Why am I doing this? As a Cashflow player, you can think of this as like SpareTime Co. in Cashflow 202. Or if you are a Robert Allen aficionado, it's about multiple streams of income. So far I'm made about $3000 over the past 4 months although I'm still waiting for a few checks (Did you hear that, TJ?). My goal by end of next year is to make enough from affiliate marketing, web site and blog monetization to cover all of my monthly living expenses, including mortgage. That means income from other sources can go towards savings, investments and other businesses, of which I'm building several. Why? If something happens to my main business or a meteor wipes out my real estate portfolio and the insurance companies say "oh, gee, sorry, but Acts of God are excluded", I still have income. Or think of it this way: I want to take off a month or two and just relax because I'd still be making money in my sleep so to speak.

Posting for cash is an interesting concept and quite open to being unethical. I disclose anyway but PayperPost requires disclosure. That makes me feel better. You can see the link bottom right on every page saying I disclose and every page has a link to my disclosure policy.

How does it work? Well, there are advertisers that offer compensation of some amount for a post. A blogger can accept it or possibly negotiate a different amount. Additionally, you can get direct placements at an amount you specify (or higher) via PayPerPost Direct. You can even get paid for reviewing this post or any other post displaying the below image:

How much can you make? Good question. I believe the highest earner last month from PayperPost was about $1300. The highest earner all time is Coleen 692, having raked in just shy of $18K! What's $18K good for you ask? How about a down payment on investment property?

So why else would you do this and why would I? Let's say 10 people sign-up from the "get paid for reviewing" link. I'll make a little money, you'll make a little money and have an opportunity for with no overhead. Plus I'd get 10 links on other blogs. Big deal you say? It is. These will likely get indexed by search engines and boost the ranking of my blog because they'd include links to mine. That means more people seeing my sites and potentially clicking on my ad links.

Anyway, I suggest you blog and check it out. Okay, you you aren't likely to get rich, but you can earn some extra money and perhaps invest it in other ways like maybe Prosper. It also will help boost search engine rankings because of links, etc., and you likely will get additional traffic. It's free and you've got nothing to loose.

Tuesday, October 30, 2007

Small Deal / Cash Flow Deal

Jeff Howard of Cape Cod AREI and a partner are looking for $25K to help them refinance a great 2-family property on the beach in Marshfield, MA. To facilitate this, they are looking to get another 5% cash to bring their LTV to 75% because of the changing mortgage landscape. As always, do your own do diligence.

You can lend as little as $50 and you'd get paid 18.26% APR on this! Prosper does all the tracking and collects a small amount of your earnings as a fee. When you set up as a lender using the link below, you get paid $25 just for funding your first loan! If you lend $50 to Jeff, if the loan goes full term, you'll make $14.33 on your $50 while your principle is being returned monthly! 43% is a spectacular CCR.

So check it out. You might just find this a vehicle that helps.

Financed with Prosper, people-to-people lending

Need to borrow? Give Prosper a try! Rates start at 7% and go up to 29%. You create a request to borrow, set your rate and lenders try to fund you. Be reasonable and you should get your listing funded.

Borrow up to $25K. Rates as low as 7.00%.

Monday, October 29, 2007

Change in game days

Starting in November, the Leominster game for the Twin Cities Rich Dads and Moms Cashflow Club moves to the 2nd Saturday of the month to line up with the Northern Worcester County Real Estate Investors meeting. The NWCREI begins meeting in January.

The Fitchburg game continues to be generally on the 4th Saturday of the month. It follows the Worcester Real Estate Investors meeting.

Lessons from October 27th 2007

I couldn't make the game on October 27th for the Twin Cities Rich Dads and Moms Cashflow Club but I understand that it was a good game. In attendance were James and Debbie Greelish, Mike Marques and Sue Sudhalter, Danielle Rocheford and Dan Langford.

The following was sent in By Debbie Greelish:
We had 6 people playing Cashflow 101 tonight. James and Debbie took opposite stratagies. James bought anything that was either underpriced or had a good return on investment...no matter how much he had to borrow or how negative his cash flow went. at one point, he had a negative $6,000 per month cash flow. That equates to living off your credit cards and borrowing from your 401K. One player commented on how it was hard to believe someone with that negative a cash flow could ever get out of the rat race. One house buyer later and he paid off all his dept and left the rat race behind.

Debbie played the doctor and was ultra conservative. She would not buy anything unless she had the cash required for the down payment. No borrowing from the bank at 120% for her. She eeked along with a few stock deals, paid off her retail debt, bought a couple of undervalued 3 bed/2 bath houses that were good deals, but didn't have much for cash flow. Then came the $1 stock. After buying 10,000 shares at $1, (not borrowing, just paying with cash) she hit it big with a $50 / share payoff. Sitting pretty with 500K in the bank, Debbie paid off her credit cards, school loans, and car loan. Then she went looking for big deals. She got lucky and any draw was gold. 8-plex, 24-unit apartment building, Car wash. Then that same house buyer that put James out snapped up 3 houses from Debbie, bringing her back to over 500K in cash in the bank. Another 12-unit building and Debbie was out of the rat race as well.

The best thing learned tonight is the benefit of having capital gains properties as well as cash flow properties. The cash flow gets you out of the rat race, but the capital gains speeds things up. James could not have overcome his negative cash flow without having a property to sell that had lots of equity. Debbie would not have even looked for those great big deals if the stock sale had not given her cash. She also may have been driven back to small deals before reaching her cash flow goal if the small properties with big equity had not sold. Both strategies required the player to be willing not only to buy properties that had cash flow(the end goal) but to be willing to sell properties for profit (the means of reaching that goal). There is great truth to what is said: 'You make your money when you buy the property, not when you sell it.'

Lee's comment: I find it interesting that there was no partnering on deals in this game. I can't really say why since I wasn't there though.

Monday, October 22, 2007

Self-employed in the Rat Race

For a while now, we've been talking about adding a house rule that allows someone in the Rat Race to leave their job and become a full-time real estate investor. If you've been around real estate investment clubs for any length of time, you've met someone who's done this.

Starting with the game on Saturday, October 20th 2007, we've finally pulled the trigger on this rule. Essentially, when you are down-sized, you can choose to go to work for yourself if you like.

Instead of waiting two turns to get a new job, you pay your expenses and roll normally on your next turn if you want. Your income is limited now to your passive income. Pay close attention as you play or you will be bankrupt!

If land on down-sized again, you roll one die.
Role a 3 or less: the space acts as a another pay check. Essential, as a self-employed person, you control your destiny and work life. You take a month off, you can even if it's not always the most wise thing to do. And lose a turn.

Role a 4 or higher: there is an economic downturn and your passive income cuts in half for 3 pay checks. But you don't lose a turn.

If you choose to wait two turns and get another job, everything is the same.

Lessons from October 20th 2007

I continue to be amazed at the turn-outs for games and the energy everyone brings to games. We had 11 people for the October 20th Twin Cities Rich Dads and Moms Cashflow Club and for the very first time, both games played were Cashflow 202. People in attendance were regulars James Greelish of Worcester REI, Bob Kay, Terry Fairley, Danielle Rocheford, Bill Holmlund, Herb and Lee Johnson of Beko Investments and Worcester REI. Here for the second time was Ann La Roche and first timers playing with us were Greg Aldrich of Impact Networth, Kim Shreffler and Gus Martino. Like many of us, Kim and Greg are both real estate investors. So once again in Leominster, we had 11 people.

Playing on table 1 were Bill Holmlund, Bob Kay, Ann La Roche, Danielle Rocheford, and Lee Johnson (myself). Our table did a ton of partnering on deals. I personally partnered on no less than 5 deals! Some deals I did myself and some deals took everyone at the table to put together. In some cases, the person drawing the card had little cash and the other 4 people all wanted to participate. Instead of fighting for the deal, we each agreed to reduce our stakes and keep cash on hand to do more deals. Remember, Cash is king.

I started with what probably is the worst portfolio, which is stock only, and included overpriced purchases of MYT4U and OK4U. Generally, both tank and I don't make anything on them but this time I actually made something small on one of them.

Additionally, this time I had owned no businesses, had no royalty income, etc. It was all real estate. Considering that we started playing about 6:30PM and there was a lot of talk and recording of deals, etc., the last person got out of the Rat Race by 9:45 PM. I got out first of the Rat Race first but I was not the first to win.

I started with just my savings and monthly cash flow, which is okay for the engineer. Some others started with cash and cash flow so I felt confident starting (and staying) with big deals.

Almost immediately, I partnered 50-50 on an 8-plex, taking a bank loan for part of my share of the down payment and a few "months" later, sold it to a plex buyer that made both owners happy because we both pocketed $33K. That took care of my bank loan that had grown to $16K and paid off my credit card and retail debt. My cash flow had dropped to about $1000 per month but because of the sale, it jumped back to nearly $3000 per month. And I still had cash that allowed me to buy duplexes and the like with what I would previously have considers large down payments, and still have cash. I even was able to sell a option.

I find it rather ironic that with my cash flow growing past $6000 and $7000 and with cash growing at one point to $140,000 +, because of deals I completed on my own or as a partner, my cash shrank to $680. And then I got downsized. However, because of my cashflow (substantial and not negative), I was able to borrow $4000 to cover the short-fall.

And it was control, dealmaking, and ability to negotiate and cooperate that enabled me to get out. For the longest time, I was the only one with all risk insurance and therefore everyone wanted me to control the deal which meant therefore I could sell when I needed cash. However, I also looked at others situations when talking about selling which won me trust on future deals. I joined a deal when I drew a card for a 1031 exchange. My fee for transferring it was to join the new deal with Danielle for a portion of what was now a 16 unit apartment; so they didn't have to pay me any money to buy the card, I took a portion of the deal AND became the general partner because of my all risk insurance.

The final deal that got me out was a 1031 exchange deal in a market card. I was the managing partner/trustee/manager or the property on large property that I owned 75% of it before the exchange. Bill paid me $4000 (which covered my bank loan) and I kept enough enough of a percentage to keep cash flow that would put me at passive income being 2X expenses. That exactly worked out to giving up 25%, receiving $4000 and getting a substantial increase in passive income. It cost Danielle nothing, she still had 25% of the new deal and Bill because general partner because he now had all risk insurance.

Within another "month" or two, Bob joined me on the Fast Track, followed by Ann, Danielle and Bill. There were some business buyouts and I started two franchises and actually had one franchisee, which again shows the power of working together. Bob won first, and then Ann and I won almost simultaneously. We stopped at this point because Bill was the last person on the Fast Track and he would have won in probably 3 more rolls.

And this was all by 9:45PM!

I'll try to record the number of months (paychecks, etc.) I get next month so I can show the number of months to translate into life.

On the other table, James and Greg both pursued a strategy of heavy negative cash flow. As a result, nobody partnered on deals. Gus got out of the Rat Race first about the time that most of us on the table I played on had won already on the Fast Track.

This got me thinking about the power of partnering on deals. Had there been a pattern of partnering instead of borrowing large sums and paying out more than one receives because of negative cash flow, I have no doubt that everyone would have succeeded and exited the Rat Race sooner. That doesn't mean negative cash flow is always bad but it needs to be a measured, educated response and fit with your risk tolerance. I've played both ways and I've certainly done the former in real life and am actively pursuing the later in real life. Because of the results I've been experiencing, I'm finding that partnering is maybe the most powerful way to get out where everyone goes for the ride.

Friday, October 19, 2007

October 2007 Cashflow Games

The next two Twin Cities Rich Dads and Moms Cashflow Club are coming up. There's is a game today, October 20, 2007, here in Leominster and another game in Fitchburg on October 27, 2007. Networking starts at 5PM, and the game starts at 6.

Subscribe to the newsletter for directions and to RSVP if you are coming and sharing in pizza. It's free to play. Expect to contribute $5-7 if you want pizza.

Last month in Leominster, we had a hard money lender as speaker, 14 people here during networking and 11 playing on two tables. In Fitchburg last month, we had 14 people on 3 tables.

We play both Cashflow 101 and Cashflow 202 and all are welcome.

Jim Cramer: Cash is king

Tonight, on "Mad Money", Jim Cramer said "cash is king". I know it's not the first time he's made this pronouncement and he was talking about stock portfolios.

He says that if you have only 5% cash in your portfolio, you are maxed out. He recommended keeping at 10% cash portfolio with a strategy of taking some gains off of the table (he calls it "schnitzel"), even if that means you raise your cash position to 40%.

He talked about making this mistake himself in the past.

I think this applies to real estate also. I know I've made this mistake before and I'll bet most real estate investors have too.

Real estate tools

I'm pretty sure that everyone reading this blog is trying to escape the rat race.

We need tools to do that so to help you evaluate real estate, I've posted some mortgage calculators at Beko Investments.

So now you all have access to this kind of tool and don't have to go searching for them. I still prefer a good old financial calculator (link to come so you can buy one) but they aren't always with you. So check these omortgage calculators out.

Sunday, October 14, 2007

Disclosure Policy

This policy is valid from 14 October 2007.

This blog is a personal blog written and edited by me. For questions about this blog, please contact ratraceescapes @t bekoinvestments daht com.

This blog accepts forms of cash advertising, sponsorship, paid insertions or other forms of compensation.

This blog abides by word of mouth marketing standards. We believe in honesty of relationship, opinion and identity. The compensation received may influence the advertising content, topics or posts made in this blog. That content, advertising space or post will be clearly identified as paid or sponsored content.

The owner(s) of this blog is compensated to provide opinion on products, services, websites and various other topics. Even though the owner(s) of this blog receives compensation for our posts or advertisements, we always give our honest opinions, findings, beliefs, or experiences on those topics or products. The views and opinions expressed on this blog are purely the bloggers' own. Any product claim, statistic, quote or other representation about a product or service should be verified with the manufacturer, provider or party in question.

The owner(s) of this blog would like to disclose the following existing relationships. These are companies, organizations or individuals that may have a significant impact on the content of this blog. We are employed by or consult with: Beko Investments, Worcester Real Estate Investors, Northern Worcester County Real Estate Investors, StormForge Technologies. We serve on the following corporate or non profit boards: Mount Gunnison Fuel Company, StormForge Technologies. We have a financial interest in the following that are relevant to our blogging: real estate investing, small business, Beko Investments, affilliate marketing, Worcester Real Estate Investors and Northern Worcester County Real Estate Investors.

To get your own policy, go to http://www.disclosurepolicy.org.

Thursday, October 4, 2007

Great video for anyone trying to get out of the Rat Race

A bit heavy of on trying to scare you but it has a powerful message:

You have to rely on yourself, not the government, a pension/retirement account, your boss, etc., if you want to break free of the rat race. This motivational video is all about you: start a part-time business in the basement, earn extra money, keep extra money, and work to set yourself free.

That's why we play Cashflow, right? Right?

We want to get out of the rat race. Some of the Twin Cities Rich Dads and Moms members are employees, are self-employed (own a job really, me included), own investment real estate (I do), invest in the stock market or really own a business. We come from all parts of the Cashflow Quadrant and we all have one thing in common: we want out of the rat race. Let me repeat that a little louder because I don't think everyone was listening:


Many of us are trying to improve the tools we have to do this. Some are taking or have taken coaching, some of us belong to a real estate investing club like the Worcester Real Estate Investors and Northern Worcester County Real Estate Investors, belong to professional organizations or landlord groups like the Northern Worcester County Landlord Association. Many of us subscribe to newsletters on areas of interest. And there is lots of reading involved.

How you do it is up to you but I'm working at it several ways: self-employed for now moving into business ownership, real estate and investing in other things that make sense.

Boston is a big Red Sox town so I'll use a baseball metaphor:

Don't try to hit run every time; that might work for the David Ortiz' of the world. You might get lucky but Big Papi has incredible skill and power and can do it with regularity. I can't. Playing by myself, I've got to play small ball and look for singles and doubles. Or even a sacrifice.

Investing is a team sport. It's unusual that a team wins solely on the luck or skill of a single player.

Take partnering. You've now got the skill of many working as one. That means a by working together, if you and I and a few other people work together, we collectively become a power hitter/base stealer whatever. Together we have a big impact.

Want an example? Look at the last game post at the 3 people that got out on one deal by partnering. 3 people! One didn't even have cash.

Think on that that for a while.

Lessons from September 29th 2007

Big game at the Greelish's. 14 total people on 3 boards. There were two Cashflow 101 games and one Cashflow 202 games. People in attendance were: James and Debbie Greelish, myself, Bob Kay, Dan Langford, Murthy Pothuraju, Mike Marques and Sue Sudhalter, Jeff and Tina from the Northern Worcester County Landlord Association, Tina's parents, and Brian and Hyun-Ju Lucier of the Northern Worcester County Landlord Association. Thanks to everyone for coming.

I'll let Debbie describe the table she played on below:

"Wow! What a great game we had last Saturday!

I (Debbie) played Cashflow 101 at Table 2. We had the extreme of occupations at our table: the Doctor and the Janitor. I've always liked the doctor, because there is always enough money to do a deal, even if it is a small one, but you can't beat the janitor for getting out of the rat race quickly. What you can learn is the importance of limiting what I like to call 'non-performing' expenses: the $1,900 mortgage/rent payment vs the $200 mortgage/rent payment; the $380 car payment vs $60 cap payment; the $270 credit card payment vs $60 credit card payment; the $2,880 other expenses vs $300 other expenses; and the $640 per child expense vs $70 per child. Many of these expenses represent not being able to wait for our reward. Advertising works, and we have been inundated with advertising all our lives saying we deserve it, need it, and can have it now, but if we simply bought assets instead of liabilities and waited for our reward, then we would get to work and play on our own terms. Our Janitor made it out of the rat race before anyone else and our Doctor never made it out at all. It wasn't because the Janitor had more assets than the Doctor. The Doctor had more than twice the passive income that the Janitor had. That says something important about the expenses."

Thanks, Debbie. Back to Lee:

On table 3 for Cashflow 202 I played on, with Bob, James and Dan, we all played the Engineer to see the results. We did not start with the same portfolio however. We saw a good mix of starting position (portfolio strength), luck as to what deals came your way, risk tolerance, decision making skills, etc., deals you couldn't do because the card said you hesitated, all play in to different outcomes. James got out in 45 minutes because of decisions he made, deal making, partnering, and risk tolerance; instead of going to the fast track, he came back to the rat race.

This was an interesting game to watch: as people ended up with too much cash, so to speak, the desire to overpay for a deal just to do a deal creeps up on people (myself included). I think this happens in the real world too especially when there are too many people with money bidding on a property. It also shows that a property or business may be worth more to me than it is to you on some given day or worth very little the next. In some cases, something is worthless to you one day vs. the next.

There were several market cards drawn that affected rents, with two dragging them down and one pulling them up. My starting portfolio included a duplex and a four plex, both cash flowing $50 per unit. Then a market card was drawn pulling rents down $50 per unit. I had $0 cash flow from these but I wasn't losing money so I figured I could hold out for a while. This turned out to be quite a while. I wasn't able to do an exchange and no rent increases occurred while I held them. But a buyer appeared at $40K per unit and I sold, pocketing a decent amount of cash.

I had some cash during this time but not a huge amount. I had enough to cover expenses. Now I had the money to move forward, partner on deals or do them myself.

Over on table one, there was an important nugget playing Cashflow 101. There was a big deal that nobody could pull off alone. But 3 people could together and it got all 3 out on that turn! Think about that. I believe the person who drew the card didn't even have money in the deal but either through generosity of the other partners or deal making skills (or both), this person received a big enough piece and was out of the Rat Race.

The lesson there is when a good deal appears, be creative and look for help.

Tuesday, October 2, 2007

Lessons from September 15th 2007

Another big turn out for the Twin Cities Rich Dads and Moms Cashflow Club at the Leominster game. 14 people were here during networking including our guest, Naz Dirinian of Financial World. Naz is a commercial mortgage broker and hard money guy. Naz spoke about different programs currently available and answered a lot of questions. Thanks, Naz, and we hope to see you again soon.

The number dropped to 11 for the games and we had one game of Cashflow 101 and one of Cashflow 202. Playing tonight, we had Bill Holmlund (real estate broker); James Greelish of the Worcester Real Estate Investors; myself; Terry Fairley; Bob Kay; Mike Marques and Sue Sudhalter; and Maryann Lacey. Additionally, playing with us for the first time, we had Ann Le Roche; Jay Johnson of Re/Max and board member of the Northern Worcester County Landlord Association(I'm a member); and Murthy Pothuraju.

Playing Cashflow 202, we had James, Bob, Terry, Ann, Murthy and myself. Ann and I both ended up playing the Engineer although we had different starting portfolios. There were a combination of things that went on in this game: I kept drawing property cards where I hesitated and the player to my right got the deal (Ann) and we had our first partnering on a deal happen (Ann and James) and this is now a house rule.

Hesitation on analysis happens every day in real estate investing and I'll be we all know someone who does it chronically! So it was me in the game tonight. And let me tell you, it cost me! No money down, cash flowing deals, even if the purchase price is a little high, have an infinite return! Passing on three of these helped Ann a lot. I started with a fair amount of cash and real estate plus some stock and I ended up struggling whereas Ann got out fairly quickly.

Ann and James partnered on a good sized apartment deal and James got out pretty quickly after partnering on this. Learn this lesson. Robert Kiyosaki repeats himself repeatedly: investing is a team sport. Your team include lawyers, accountants, bankers and mortgage brokers, carpenters, etc. and it can also include other people with $$$ or something else to contribute. James couldn't do the deal alone and Ann couldn't buy it from him unless one of them went to seriously negative cash flow early in the game. This way neither did.

So I see three big lessons from tonight: don't hesitate on money making deals (especially when they are free), starting from the same condition doesn't mean the same results (luck, effort and decision making skills) and look for help when you've got a good deal that you don't have the money to do alone.

Wednesday, August 22, 2007

Lessons from August 18th 2007

I'd like to thank everybody who came last Saturday night for the Twin Cities Rich Dads and Moms Cashflow Club. We had 11 people so once again we played Cashflow 101 AND Cashflow 202.

We had two new faces, one returning for the second time and all others are here regularly. We had another great turnout!

We'll meet again at Lee's September 15, the 3rd Saturday.

Playing last night, we had Susan Sudhalter and Mike Marques, Maryann Lacey, James Greelish, Bob Kay, Terry Fairley, Mark and Sean Biller, Brian and Lauren Trickett and myself. Maryann was here for the second time, all the way from Newburyport.

I played Cashflow 202 for the first in several months. We had 6 playing 202 and 5 playing Cashflow 101.

I chose the engineer and returned the business manager to the deck. I wanted the extra cash. Normally, it's a little easier to get out with an occupation with lower expenses but I'm refining strategies. It turns out that was a good choice.

I started with a what I felt was a week portfolio, a lot of stock that was bought for too high a price per share and no cash. My first two turns added expenses including joining a country club to impress my boss: $20K ($16K borrowed) and $400 per month. Now I had negative cash flow and had to really borrow to keep out of bankruptcy.

The most important lesson is never give up. I eventually did well on a put option that allowed me to pay off $36+K of bank loans making me positive. Selling a couple of plexes then game me cash; a lot of it. But this was about 2 hours into the game. One person was already out and two more followed, leaving Terry and I still in the Rat Race.

Terry had a good portfolio and was working his way out but still had a long way to go as the doctor. He a seemingly sure thing that wasn't his debt was huge and his cash flow very negative. I bought his portfolio "subject to" for what he had into it let. That dropped his negative cash flow to about $4800 because he could pay debt down. About a dozen turns later and up and down with the debt, he forgot to borrow before his turn. With no assets to sell, he was bankrupt and out. That stopped the game as the other four on our board had already achieved their objectives in the fast track.

Now back to the sure thing: We've had some discussion here about taking stock shorting out because in most cases, there was no point because it was too likely to succeed. Besides, who's going to short OK4U at $20? Well, we were wrong. Terry shorted 3000 shares of I don't remember what at $40. Then there was a stock split the rules say double the shares and halve the strike price (I don't understand why). That meant 6000 shares that he had to sell at $20. And the price was $35. He lost $90K. Boom.

Additionally, we decided on a new house rule: you can sell Spare Time Co. 1 cards. The game says no to all three Spare Time Co. cards.


Typo in the newsletter. The correct link is here.

Tuesday, August 21, 2007

Official House Rules

The following are the official house rules for the Twin Cities Rich Dads and Moms Cashflow Club and periodically are updated:

Cashflow 101 & Cashflow 202

  • bankruptcy from the optional rules
  • bank loans from the optional rules
  • paying off debt from the optional rules
  • cash kept as a running total on paper instead of using game bills
  • selling your deal after you've already bought it to another player
  • draw two occupation cards and choose one
  • partnering on a deal
  • full-time self-employed in the Rat Race
  • Fast Track players as private lenders to Rat Race players

Let me detail reasons for our rules.

  • Bankruptcy: if you are paying out rather than taking in cash monthly, is a bank going to loan you money? Nope, not when you need it.
  • Bank loan repayment: Borrow and repay in $1000 increments. Ex: you borrow $20,0000 but your can repay $1500 or $50 at a time. You must repay in increments of $1000 such as $5000
  • Pay off debt: At any time, regardless of who's turn it is, you can pay off debt. It's not like you have to wait until Friday once a month to pay debt in the real world. You must pay the balance of retail or credit card debt if you are wanting to make a payment
  • Cash: Keep the total on a sheet of paper. This may seem less real but is it? Do you keep cash buried in the backyard and then dig it up to pay your bills? Nope, you use a debit card, right?
  • Subject To Sales: Basically a subject to sale where you pay an agreed upon amount for a property or business and take over the payments, like in the real world. You might get less or more than you paid out originally and you'll get more than the bank will give you on a foreclosure
  • Two occupation cards, pick one: Chances are, you had a choice in your chosen occupation in the real world. Why should you arbitrarily get a random one in the game and have no choice in the matter?
  • Partnering on a deal: If you can't or don't want to do a deal by yourself, use cash from another player and share! For example, if the deal costs $100,000 to get into, and both players put $50,000 into the deal, the one who drew the card would control the deal but each player could record their percentage of the deal on their financial statement. So if the two parties agreed to split the deal 50-50, it essentially is a LP (right, you don't want more risk than your have to take, yes?). So in this example, if the deal is split evenly and it cash flows $3500 per month, each would record a RE LP costing $50,000, down payment of $50,000, no mortgage and cash flow of $1,750 per month.
  • Full-time self-employed: you can choose to go to work for yourself if you like. Instead of waiting two turns to get a new job, you pay your expenses and move normally on your next turn. Your income is limited now to your passive income. Pay close attention as you play or you will be bankrupt! If you land on down-sized again, you roll one die. Role a 3 or less: the space acts as a another pay check as you take a vacation for the month and lose one turn. Essential, as a self-employed person, you control your destiny and work life. If you want to take a month off, you can even if it's not always the most wise thing to do. Role a 4 or higher: there is an economic downturn and your passive income cuts in half for 3 pay checks but you don't lose a turn. If you choose to wait two turns and get another job, everything is the same.
  • Fast Track players can lend to Rat Race players at the same terms and conditions from the bank except that the rate is 5% instead of 10% per month. This serves two purposes: (1) it allows players to restructure debt like you would in the real world and provides more realistic exit strategies for debt and (2) it keeps Fast Track plays from getting quite as bored because there are things the can do in the Rat Race, where the lessons in the game are really learned.

Cashflow 202

  • Spare Time Co.: Players can sell Spare Time Co. 1 cards but not 2 or 3's.

Wednesday, August 1, 2007

Lessons from July 21st

The Twin Cities Rich Dads and Moms played at my home again on the 21st. I continued working towards a solid strategy for playing high income occupations. We had 8 people, with one table playing Cashflow 101 and one table playing Cashflow 202. Both tables had 4 people.

I played Cashflow 101 again this month.

As the airline pilot, I had a lot of income and high credit card and retail debt. The key is the high cash flow.

Once again I immediately went into the big deals, but I passed on a few before taking one. I'm blogging a little late for it to be fresh in my mind what I bought but I remember dipping into my not unsubstantial cash flow to the tune of about $1000 per month, meaning I borrowed about $10,000 at the games 10% per month rate.

The lesson I've learned on the high income occupations especially is to pay off the bank loans. It's important for all but I think even more so for these. I'll explain.

The high income occupations in Cashflow 101 and Cashflow 202 typically, like the real world, also carry a lot of debt and expense. It's so high that it takes an exceptionally long time to get passive income to exceed monthly expenses. So by borrowing the down payment (which can really be a good thing), you obviously increase your expenses. So pay this down every turn that you have excess cash. You accelerate your income which will in a short period allow you to not just pay down the $1000 increments but soon $2000 increments.

If you end up financing a couple down payments, think about taking a time out from big deals, switch to small deals and pay it down. Or stick with big deals if there are people to wholesale them to. 5 paychecks can increase your cash flow by $1000 per month or more. That supports a $10,000 per month bank loan in the game.

Thursday, June 21, 2007

Lessons from June 16th

Last Saturday, playing Cashflow 101, I was the Business Manager. With the not insubstantial monthly cash flow of this occupation, I could afford to finance some big deals. Problem was, I took the first one that came my way. I'll explain.

The lowest priced limited partnership was the card I drew. Because of the starting cash that I had, the cash flow I already had monthly and the cash flow from the LP, I could do the deal. This left me about $330 (I don't recall the exact figure) monthly in cash flow. This could be okay still, as long as I didn't run into a lot of expenses.

I did though. 3 babies, seemingly a couple of doodads each time around and ever increasing bank loans. Thank God, I didn't buy the boat!

This also dropped me into small deals which meant stock and real estate, where real estate covered the down payment with the cash flow. Careful control of bank loans, including some for stock at $5 and $10 per share, and slow going in the small deals (everyone else was on to big deals!), and eventually I was able to sell stock.

Before being able to sell, careful cash management and tight investing, like a tight poker player, allowed me to get back to about $700 per month cash flow despite the additional loans and the kids. At $700 per month, I could accumulate cash and pay down loans to add $100 per month cash flow or get into a deal.

Eventually selling the stock allowed me to pay off loans sufficiently to bring my cash flow up to $1500. Within a few turns, it was up to $2000. So I really was back into big deals and pretty quickly put myself out of the Rat Race.

So what did I learn? I should have passed on the LP and taken a smaller big deal, even if it took quite a few turns. Because I took this, I had to pass on the widget company (I almost always try to start a business in the basement). Too bad, because I drew both cash flow increase cards AND had the $50K buyer come by. There were additional deals that I could have done that wouldn't have strapped my cash so severely. And put money in my pocket every single month.

What did it cost me? Well, I still got out of the Rat Race as well as the fast track, but I'd have done it at least an hour sooner, it not two. That's a long time. And a lot of hard work.

Game from June 16th 2007

This past Saturday was the most recent Twin Cities Rich Dads and Moms Cashflow Club get together. We had a little bit smaller crowd totaling 8 people including myself. But, hey, that's still boards with 4 people each!

Those in attendance included James Greelish, Terry Fairley, Herb, Rich, Judy, Susan Sudhalter and Bill Holmund. Rich, Judy and Bill were here for the first time. Rich and Judy were playing Cashflow for the second time. Bill is an experienced player and hosts a weekly game in Worcester. Bill is a realtor/broker, Bill is in financial services and, I'm sorry to say, I don't know what Judy does. But I expect them all to be back so I'm sure I'll learn more.

James, Terry, Bill and Sue played Cashflow 202. I believe this was the first time for Terry, Bill and Sue. And if I recall correctly, after a long struggle, all got out of the Rat Race! And a couple of them achieved a $50K increase in cash flow and either 3 dreams or their own dream.

The table I played Cashflow 101 on included Herb, Rich, Judy and of course myself. Judy got out of the Rat Race first, followed by Rich, myself and Herb. Yes, all escaped the Rat Race. Rich achieved $50K in increased cash flow first and he and Judy headed to dinner. Herb and I continued, I achieved $50K increased cash flow and Herb was well on his way.

I'm looking forward to the next game Sunday, July 21, 2007. Until then, look for deals, educate yourself and make progress to escape the Rat Race.

Wednesday, May 23, 2007

Lessons so far

I've been playing Cashflow 101 and now Cashflow 202 for about 18 months or so. Typically, most people play, to borrow a poker term, really tight and I think that is probably true in their real lives.

You see, most of the people who play Cashflow here or at James' are just starting out, don't own a business and don't own any real estate. It's easy to fall into the patterns of other people playing. Now, I normally will dip into monthly cash flow to support debt on a property and many of the players think that's is risky and you hear a lot of that in talk (or you used to!). This is even from a couple of people who have some property.

Things are changing in the game now because people are seeing that financing the down payment works, some are doing Rich Dad U and are being taught it, etc.

In the real world, all of the property except for my home, I've bought with 100% financing and I've walked with money from the closing table. Granted, sometimes they are alligators, but that's normally a temporary situation.

So the lesson is you don't have to use all of your own money for your down payment. Leverage what you can afford to leverage and support with negative cash flow. Sure you need to be a little circumspect about it by not having huge negative cash flow indefinitely but you can for a while.

I can't wait to start play testing using private money in the game, lease options, quitting your job and becoming a full time real estate investor, as well as partnering and entities all within a Cashflow game! These will really stress test the "not using" your own money philosophy.

Stay tuned!

Saturday's game

This past Saturday was the most recent Twin Cities Rich Dads and Moms Cashflow Club games and I was determined to continue the style of investing that I don't see as all that aggressive any longer. We had 11 people and two games. The other table played Cashflow 101 and we played Cashflow 202 on our table.

House rules here include drawing two occupations and putting back the one you don't want. I took the Business Manager and the portfolio I drew included I believe $14K cash (plus savings), stock and a duplex with about $120 cash flow.

If you haven't played Cashflow 202, the rules are somewhat more realistic than in 101. For instance, your passive income must exceed your expenses by 2X, not 1X. Also, you are limited to 5000 shares of stock on purchases. Also, you must either buy your dream or 3 dreams AND increase your cash flow by $50K.

After my first turn, the next player's Market card was a plex buyer at $35K per unit and I sold, pocketing about $25K. On my second turn, I passed paycheck, landed on Opportunity and drew a Cashflow deal. 24 Unit apartment for sale with $2500 monthly cashflow. Between the $40K+ I had in cash and the $2500 cash flow from the property, I could float a $25K bank loan without going into negative cash flow and dipping into my monthly cash flow. I felt like I was on the way, decent apartment building with good cash flow that I could pay down the bank loan monthly by $1K and slowly boost my monthly cash flow. Boy, was I mistaken in a good way! The accompanying Market card was an apartment building buyer at $40K per unit; I don't recall how much the purchase price was but after flipping the apartment house and paying off the bank loan, I had a little over $400K cash, even if I had no passive income. There wasn't a deal I couldn't do!

On my 3rd turn, I couldn't have drawn a better Cashflow deal card from Opportunities: an offshore reinsurance trust paying $880 per month per unit bought at $50K. I could afford 8 of them! That's $7040 per month passive on the 3rd turn and well more than 2x my expenses and I was out.

Nothing exciting on the fast track: 1-1/2 turns around the board and I had bought my dream (run for Mayor) and had boosted my cash flow by $50K and I won.

James had just gotten out of the rat race at the time I won. He paid off his debt with the large amount of cash he had although he really debated staying in the rat race longer to boost his cash flow so that his Fast Track Cashflow Day's would be a lot higher. But he opted to get out sooner. Very interesting strategy... If you can stick it out to get an extra $1-2K or more of cash flow before exiting, that's $100-200K more per Cashflow day and that much easier to do deals on the Fast Track. I'm going think on that for a while! Interesting strategy to play sometime.

Friday, May 18, 2007

Real World Purchase and Negative Cashflow

Here's a deal the likes structured like the deals I've been structuring in Cashflow 101 and 102 games and like I've put together and am working on more of in the real world. Check out this You Tube video of Wayne Palmer talking to Robert Kiyosaki at the Rich Dad Studios about the purchase of a 185 unit self-storage facility. With the seller being the bank. The deal has $260 per month negative cash flow. Would you do it? I would. Click and listen!

Wednesday, May 9, 2007

Entities in a Cashflow game

In the very near future, I'll be trying out entity creation within a Cashflow game. Look for new pieces to appear on the board game, with their own turns and income. C Corps, LLCs, S Corps, etc. I think this will drive home better than anything we can read just what having entities can do for you when it comes to making money and tax planning.

Stay tuned!

Next Game

The next Twin Cities Rich Dads and Moms Cashflow Club meeting and game is in Leominster on May 19th at 5PM. RSVP's are necessary to attend and for pizza. Pizza is about $6 per head.

This month will be the first with speakers. James Greelish will talk about trusts as related to real estate in MA and I will speak about LLCs and their relationship to real estate. We'll start playing at roughly 6PM.

I'm expecting that we'll be an overflow crowd. My home can handle 12 and if their are more RSVPs than that, we'll be moving to meeting space so that we can handle everyone!

Monday, April 30, 2007

Saturday's game at James & Debbie's

Because of James' house rule for Cashflow 101 and Cashflow 202 of drawing two occupation cards and picking the one you want, I assumed I'd get at least one mid to high income card.

Silly me.

I drew the mechanic and the janitor. These are the two lowest income cards. I went for the mechanic because of the slightly higher cash flow.

There were 6 of us at the table. James played a strategy Debbie and I called wimpy aggressive. Debbie played a very aggressive strategy. I played the strategy that I was calling aggressive (but don't any longer), except financing the small deals the way the airline pilot was financing the big deals.

3 of us got out of the Rat Race (James, Dan and myself). I can't go into too much detail because it's already becoming kind of fuzzy. 4 hours into the game, the mechanic had bank loans of $18K, a house, 5000 shares of MYT4U at $1 (just bought on a loan) and 300 shares of OK4U at $5. The player immediately after me (James)drew MYT4U for $10 per share immediately after I bought it for $5. Normally, I'd pass on selling at $10 except that this let me pay off my bank loan in full and and put me at $1600+ positive cashflow from just over $1K negative. Then I sold stock at 40 for the other (very lucky indeed).

Now, at James', you can buy and sell subject to. He wanted to pay down his bank loan sufficiently by getting the $35K he had into 4 properties (a 4 plex, 2 houses and a condo) and I had the cash. Didn't tell him until afterwards that the cash perflow from these properties would put me out. Of course, it put him out too! That's a win-win if I every heard of one.

James was the nurse and if you can believe it, had passive income of $11K. Yes, $11K. Mine was a measly $1960 but I was out. Dan already was.

Think you can't buy a portfolio of properties from a single investor? Think again. Sometimes they are retiring, sometimes they want to put money into something else, sometimes they are getting divorced. It happens. I know some investors that have unloaded before and I know some who have bought.

Keep an eye open.

Sunday, April 29, 2007

House Rules

Special house rules at my place for playing Cashflow 101 and Cashflow 202 include:

  • bankruptcy from the optional rules
  • bank loans from the optional rules
  • paying off debt from the optional rules

Special house at James Greelish's house that I'm adopting:

  • selling your deal after you've already bought it to another player; basically a subject to sale where you pay some about and take over the payments
  • draw two occupation cards and choose one

Special house rules that James and I are working on:

  • lease purchase options / rent to own in the game
  • Fast Track players acting as hard money lenders to people in the Rat Race
  • partnering on deals while in the Rat Race

Rules we think make sense but are too hard to implement in the board game:

  • Put back all cards including real estate after recording on your financial statements and reshuffling the deck each time.

Stay tuned on these. We think that they'll make the game more realistic.

Adventures in Role Playing

So I had another masterbatory Cashflow experience. I admit I've done it in the privacy of my own home. What is it you say? Playing Cashflow the board game by myself and playing more than one occupation. It's easier in some ways to play multiple chess games at once.

Some back story: I didn't want to wait too long to play again and not having Cashflow the E-game, I played alone.

This is tough enough. And for the first hour, I was on the phone with Danielle which wasn't too fair to her either (Sorry!). Not too fair for myself because it's not easy playing two parts.

I chose the occupations: the airline pilot (like before) and the janitor. I thought I would play the janitor as a small time version of the risky strategy I was playing with the airline pilot. It was a little too tough to juggle until later in the game. So you won't see anything more about the janitor in this post.

This time I watched the clock and I counted turns. Aside from yaking on the phone, I was pretty intent on the learning experience.

So once again, as the airline pilot, I started out right away with big deals. That means borrowing the down payment and borrowing to float yourself month-to-month. This time it was the 12 unit apartment building. I continued to buy and borrow, at one point having a bank loan of about $180,000. Briefly I dropped into the small deal category and bought 5000 shares of MYT4U at a buck per (one a bank loan) and was lucky enough to unload for 40. Which paid of that bank loan which put me into substantial positive cash flow.

One of the house rules here when playing Cashflow 101 here or Cashflow 202 is to follow the optional bankruptcy rule strictly. That means if you need a loan, make sure you do it before your pass Pay Check or land on Downsized and get laid off if you have negative cash flow. So calculate it ahead of time and borrow the money. So that meant a lot of figuring before the turn.

Which the pilot, at 1-1/2 hours, I had substantial negative cash (I don't remember what) but I was willing to pay the outrageous rates the game imposed (10% APM interest only and the M is not a typo). And then MYT4U came up at $40 per share. All of a sudden I had about $10K positive cash flow (about an $14K swing monthly) and in an instant, I was out of the rat race if I wanted. But I decided to go for passive income being 2x total expenses and then 3x. By the time 3-1/2 hours went by, I had $14,120 in passive income as the airline pilot, $55K in cash, had no credit card or retail debt. I even paid cash for the boat! I had even paid off the car when I was going to quit at passive income equaling total expenses.

When I stopped, I had amassed a portfolio including:

  • 2 houses
  • 1 duplex
  • 4 four plexes
  • 1 eight plex
  • 1 12 unit apartment building
  • 1 shopping center
  • 20 acres of land on spec
  • 3 limited partnerships

With just 2 people, you don't see a lot of market cards so there wasn't much hope of selling to a buyer with big pockets, like $135K for a $45K house so you can move on to big deals. That largely meant buy and hold. That's okay.

So, what did I learn from all of this? If I'm playing a game, and you know what cards have been drawn (stocks), it's easy to hit it big with stocks like I did. In the real world, that's unlikely. However, this is a strategy that does work; it needs more analysis as well as strong risk tolerance. And well developed credit lines.

Upon self-reflection, I realized that I had already modeled this behavior in the real world. Last year! I bought a couple of different properties near Boston last year for no money down. That's tougher to do now but it can still be done a variety of ways that I won't discuss here. But modeling a behavior in the game that I had already done somehow seems riskier than when I did it in life.


Monday, April 23, 2007

Stepping Out of the Comfort Zone

I host The Twin Cities Rich Dads and Moms Cashflow Club and we meet the 3rd Saturday of each month. We've grown quite a bit in the past several months and now normally have two games going at once.

People not familiar with Cashflow games or Robert Kiyosaki, should start by reading Rich Dad Poor Dad and checking out the
Rich Dad home page.

And of course the Cashflow games themselves, Cashflow 101 and Cashflow 202.

But enough shilling.

Those not familiar with the game should know that it's simplified, was created more than a few years ago and the numbers seem small, especially if you live near Boston like I do.

So what. It's the concepts that matter. Not the number of zeros in front of the decimal point.

Because of the experience of some folks that attended a 3-day Rich Dad "Learn to be Rich" seminar, I decided to roleplay based on the description of some of their experiences. Since I played a lot differently then I normally do, I wanted to share with everyone the experience. I really think I learned a lot from it. And I hope discussing it helps other people too to learn and step out of their comfort zones.

I drew the airline pilot. This is one of the high income and high expense occupations that essentially spend everything and lives paycheck to paycheck. Despite having a monthly cashflow of about $2600 (that's after all taxes and expenses folks), this occupation starts the game with only $400 in savings!

So I decided at the start of the game because of how one of our members (Michael) described some of the play from the "Learn to be Rich" seminar in Peabody, that I was going to play aggressively and he opted to do the same thing. Unfortunately I don't remember enough of his details to comment there. Only occasionally, did I back off and go for small deals and I frequently bought deals that other players felt they couldn't get into.

And you know what? I immediately did a huge deal on my first turn, buying a 24 unit apartment building. This property required $50K down but had a monthly cash from of $2800. Because of the high cash flow of the property and the high cash flow for the occupation, I still had $400 cash flow monthly after buying it and financing the whole down payment (bank loans in the game are essentially 10% hard money, interest only). My initial knee-jerk reaction was "no way, I can't do this". But then I worked the numbers. I'd be very tight at $400 per month after all expenses, but I would pay that bank loan down after all over time, even if I could only knock $1K off every few paychecks. Because each time I did that, my monthly cash flow would increase by $100.

Then I continued to buy and buy and buy. I continued to structure deals the same way. I had about $120,000 in bank loans as well as mortgages, a couple of businesses, some speculative investments (krugerands) bought at a deep discount, 1000 shares of MYT4U stock I bought at $5 (normal trading range $5-30 and just over $3K per month negative cash flow. And I still had about $17K in cash. When the game was called, I looked at the market cards as well as small deal cards. Before another turn around the board, I'd have been back to about $3K positive cash flow because of a plex buyer at $40K / unit and I'd have been able to sell my shares of stock at $40 per unit. Even after losing the cash flow from the 2 duplexes.

So at this point, I would have had the resources to pay down the expenses I had, primarily bank loans, monthly. Following no other strategy at this point of the game except paying expenses, would have put me out of the Rat Race in 40 turns, assuming not being laid off.

Admittedly, that's a long time but it's illustrative. For example, I probably would have had about $20K cash after the turn around the board and the $3K positive cash flow. Then with that positive $3K cash flow, pay down $1K in the bank loan and pocket $2K (pay yourself first, remember?). Assuming 1 paycheck every 2 turns average(it's less than that actually because paychecks are 8 spaces apart), in 40 turns with no other deals and $20K fewer bank loans, monthly cash flow would have been roughly $5K because $20K fewer in bank loans results in an positive cash flow increase of $2K. All the while how holding $60K cash and now only $80K in bank loans.

Fast forward another 40 turns and I'd have $7K cash flow per paycheck, $100K cash and only $60K in bank loans. Assuming a payoff of the loans with the cash, results in cash flow increase of $6K and a new total that in all likelihood would exceed monthly expenses or be awful close. That additional $40K could pay the car and any remaining credit card debt putting me out of the Rat Race.

Would I have stopped doing deals and shifted to the conservative debt payoff strategy? No, but it works in this scenario. And continuing to do deals would have put me out faster than 80 additional turns.

In Cashflow games, the higher income occupations tend to be harder to get out with then the middle and lower income cards because of the expenses. I think I just found the key to getting the higher income cards out: you've got greater resources (cash flow) so use it instead of just letting it eat away. Because it will get eaten away.

It was really illuminating to step (way way) out of my comfort zone. So maybe next time try
stepping out of yours or modeling some investing behavior that you don't normally exhibit in real life.

I'll try to examine this and other strategies in future posts.

First Post

Hi, all:

I've never had a blog before but I'll try now. I'm looking to post relevant lessons from playing Cashflow 101 and Cashflow 202 including in-game experiences and how this translates or how I or you have translated this into the real world of money, real estate, business and investing. Tips and techniques are good too. So this can be an introduction to escaping the Rat Race.

Thanks for reading.

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