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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!

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