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.

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