I first played Rich Dad’s Cashflow 101 game way back in 2007, after I found Think Rich Pinoy Seminar attendees who organized their own cashflow 101 game sessions.

I was hooked ever since. I play cashflow 101 whenever I get a chance to do so as part of “sharpening the saw”.

I believe that the cashflow 101 game effectively simulates one’s  journey out of the rat race and I would like to share here what I have learned from playing what I consider to be a “life changing game” and its practical applications in real life.

Here goes my Top 7 lessons learned from playing Rich Dad’s cashflow 101 game…

A photo of the cashflow 101 board game courtesy of Earth del Mundo

1. Simplify and get out of the rat race faster

I noticed that whenever I played the cashflow 101 game and was able to choose a “simple” profession like a truck driver for example, I was able to get out of the rat race faster. This happened during the Think Rich Pinoy Seminar I attended last August 2007. As a truck driver, although my salary was low, my monthly expenses were also very low.

Because I had  low monthly expenses, I already had a positive cashflow and all I needed to do was just get those passive income generating deals. After each payday, I had more money to invest, and with just a few passive income generating deals, I had enough passive income that exceeded my monthly expenses, and I was able to get out of the rat race faster.

In real life, I am applying the same strategy by reducing my monthly expenses by leading a simple life. This was also described by Bo Sanchez in his book “Simplify and Live the Good Life” and T. Harv Eker in his book “Secrets of the Millionaire Mind“. My family and I lead simple lives, which explains my very low target monthly passive income which is why I know I am going to get out of the rat race in real life very soon!

2. Start with small deals first, and the big deals will follow

In the beginning of the game, I always chose small deals even if they produced little cashflow. Later on, when the market presents good opportunities, I was able to sell or “flip” these small deals and then I used the profit to buy the bigger deals that produced greater cashflow, allowing me to get out of the rat race.

My four “green houses” which I’ll exchange for a “red hotel” during a recent game I played with Earth. I was not able to get out of the rat race during this game but we only played for an hour due to time constraints.

In real life, I am also following the same path. I focus on single family homes or properties which may produce little cashflow at  the very least, but can actually generate significant profits if “flipped” or sold through “rent-to-own”. I can then use the profit later when they are enough to get bigger deals that can produce bigger positive cashflow.

3. Over-leverage often leads to bankruptcy

During the game, we often encounter great deals that produce a lot of positive cashflow but require a big downpayment and it is tempting to borrow money from the bank just to be able to buy those great deals. However, there is such a thing as becoming over-leveraged which can produce negative cashflow situations because of the high monthly payments for those loans.

Even if one’s passive income is enough to cover the monthly payments for those loans, imagine if something happened and the monthly income of one’s investment properties were affected, suddenly the monthly payments for the loans cause a negative cashflow and can lead to bankruptcy. The same can also happen when one is downsized. This is the reason why one should avoid deals that lead to too much exposure or over-leverage.

Applying this is real life is a no brainer. I would not dare buy those multi-unit apartments unless they were in the same price range as the single family homes I focus on. As mentioned in lesson number 2 above, I can go for those bigger deals later when profits from my small deals are enough.

4. It is better to wait for a good opportunity than settle for those not so good deals

In the game, good opportunities come in the form of deals that have big ROI potential, and can be bought with little or no downpayment, while producing positive cashflow. If any of these elements are missing, I consider a deal as “not so good” and I pass them up and just wait for the good deals.

In real life, I do the same and patiently wait for good opportunities. If a not so good deal comes my way, I can either look for ways to make it into a good deal, or I just pass it up and wait for another more worthwhile deal to pursue.

5. Learn how to spot a good deal and grab it

One of the biggest challenges one faces in the game is how to spot those good deals so that you can grab them. Sometimes a good deal is right under your nose and it slips away because you didn’t realize soon enough that it was a good deal.

I believe spotting good deals is a skill and you can only learn this skill by continuously analyzing deals. Once you get the hang of it, you will start seeing those good deals more often. Normally those deals would have slipped away without you knowing it. If you see good deals often, it’s just logical that you will eventually grab one of those deals right?!

6. Learn how to protect your investments

I distinctly remember games where apartment buildings getting toppled by mud and all the cashflow generated by these properties are gone, unless I am covered by insurance.

Does Ondoy and Pepeng ring a bell? Who would have thought that a game like cashflow 101 actually teaches us to protect our investments from such disasters and calamities. Better get your investments insured with “Acts of God nature” coverage pronto!

7. Net worth is worth less, cashflow is king

Once you play cashflow 101, you will notice its emphasis on the importance of cashflow over one’s net worth. You will see that it really is more important to have positive cashflow from passive income. What is the use of having a big net worth if you don’t have any positive cashflow?

In real life, we should apply this by focusing on building our positive cashflow with income generating assets. Even if we have to use leverage to buy these assets, it really is okay. We call this good debt. Don’t be afraid to have good debts that buy real assets that produce the cashflow we need to get out of the rat race for real!

Get out of the rat race in the game, and in real life!

So you got out of the rat race when you played cashflow 101. So what?! That’s useless if you don’t take action and apply the lessons you have learned from the game in real life. But playing a game is one thing, doing it in real life is an entirely different thing… or is it?

I can truly say that Robert Kiyosaki‘s Cashflow 101 game is a “life changing” game because my life has really changed ever since I decided to apply in real life the lessons I have learned from it. Take note that I only listed the top 7 lessons I have learned and I can assure all of you that there are more lessons one can learn from this game.

People may find it hard to believe that one can learn so much from a game and can have such a huge impact in life. I guess you just have to play the game and experience it for yourselves.

How about you, have you played Rich Dad‘s cashflow 101 game? What did you learn? Are you applying them in real life?

—

My vision – financial freedom for all!

Jay Castillo
Real Estate Investor
Real Estate Broker License #: 20056
Blog: http://www.foreclosurephilippines.com
Twitter: http://twitter.com/jay_castillo
Facebook: Foreclosure Philippines fan page

Text by Jay Castillo. Copyright © 2009 All rights reserved.

PS. If you are a new visitor, please start here to learn more about foreclosure investing in the Philippines.

Top 7 lessons I learned from playing Rich Dad's Cashflow 101 game is a post from: Foreclosure Investing Philippines

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I found this very interesting advertorial in the in-flight magazine of the Cebu Pacific flight we took in our recent Boracay vacation and I just want to share it to all of you here, along with my insights and opinions. The advertorial which I am posting below is from The Property Forum Philippines, one of the top property auctioneers in the Philippines. Its president, Mr. Noli “El Subastajero” Alleje, has become a very familiar face when it comes to auctions of foreclosed properties.

This is a picture of the magazine

Secrets Revealed: Investing in foreclosures. Own your dream home or best real estate investments in auctions

With the collapse of the global financial markets, one investment stands as the best and most secured product, and that is real estate. Manuel “El Subastajero” Alleje’s top picks for property investments are foreclosures.

El Subastajero Alleje has powered his company, The Property Forum Phils., to move over 6 Billion pesos worth of real estate assets in 40 auctions conducted nationwide.

So why foreclosures???

LOW CASH DOWNPAYMENT: While you have seen the bank’s offer price to be P3M, you may have failed to notice that the downpayment is only a measly 5% to 10%. That’s only P150,000 to P300,000 as initial cash out. So how much can your P300,000 cash-in-the-bank be worth if you buy a property at 10% down payment? You would now be the owner of a P3,000,000 real estate investment…

I never knew that there were auctions that only required down payments as low as 5%! As far as I remember, all the recent auctions conducted by Property Forum Phils. required at least 10% down payment. Anyway, having a low down payment requirement is really one of the advantages of buying foreclosed properties. I often hear people say that investing in real estate requires a lot of money. I beg to disagree! However, I do understand where these people are coming from as I too had the same thoughts until I found out that only low down payments are required when buying bank-foreclosed properties and this is often called leverage. You can read more about leverage here.

LONG PAYMENT TERMS: After paying the low down payment, the balance of the investment can be paid over a short period of 5 years to a long period of 15 years. So you are hedging and earning over market appreciation…

I’m not really sure what the last sentence meant but what I do understand is that longer payment terms mean lower monthly amortizations which translates to higher positive cashflow. The last sentence could also mean that you will be paying amortizations based on the value of the real estate at the time of purchase (so you peg the price). At the end of the payment period, the value of the property has already appreciated and you can profit from the appreciation when you sell the property. Hedging basically means that you buy low now and peg the purchase price because you anticipate that the value of the property you bought will appreciate later.

LOW INTEREST: Imagine getting this low down payment, plus long payment term, at low interest rate of just 8%. Compared to purchasing fresh housing loans today with a demand of a higher lending rate, buying into bank foreclosures always offers a lower interest rate…

8% interest rates are usually available only for the first year and this is often not a fixed rate. This means at the end of the year your loan may be subject to “repricing” or adjustments in case the market interest rates have changed. What happens if a new financial crisis happens(God forbid) and interest rates shoot up? Then the interest rate of your loan shoots up as well along with your monthly amortizations, which can lead to negative cashflow situations and even more foreclosures. This is the reason why I often advice that one should always make sure that their interest rates are fixed for the longest possible term. By the way, other lending institutions like Pag-IBIG may offer lower interest rates (6% for loans up to Php400,000 and 7% for loans over Php400,000 up to Php750,000). I suppose transferring a loan from a bank to Pag-IBIG would be a good option in such cases.

EASY CREDIT APPROVAL: Fear not the credit investigation. Maybe in the past you may have made a wrong business decision that has affected your credit standing, thus preventing you from availing a mortgage. In buying foreclosure, banks go thru the CONTRACT TO SELL documentation, which entails the property to remain in their ownership. Therefore, the possibility of no mortgage or lenient credit investigation, to none at all…

Some banks use a Contract-To-Sell (CTS) wherein the Title of the property is not yet transferred to the buyer until the purchase price is paid in full. In contrast, if a property was bought through a mortgage loan, the Title is already transferred to the buyer and the same Title is then mortgaged to the bank. Because of this, the latter may require more stringent requirements. But still, even if a bank or a lending institution will be using a CTS, they would still do a credit investigation like checking a buyer’s capacity to pay, etc.

GOOD TITLE: A constant concern in real estate investment is the veracity of the title. Remember that before this real estate asset became a foreclosure, it was a collateral for a loan and has undergone due diligence review by the bank. You must also consider that banks will not endanger their integrity and credibility…

Banks are supposed to do due diligence before they accept a property as collateral for a loan so this is very true. Nevertheless, one should always do his or her due diligence even if one is buying a foreclosed property from a bank  because sometimes foreclosed properties are involved in pending court cases (like the red tag foreclosed properties from BPI-Buena Mano)  and these are annotated on the Title as a lis pendens (pending case). Always do your due diligence. At the minimum, one should get certified true copies of the Title plus traceback from the registry of deeds, etc.

IMMEDIATE APPRECIATION: When you buy real estate investments you make money, so be sure you get the best deal. It would be good to check out market values in the neighborhood…

I believe what they were trying to say was one can get immediate appreciation in the form of instant equity (Equity is the difference between a property’s current appraised value /market value and the loan principal balance) if you are able to buy a foreclosed property at a price below market value. This is the essence of the statement “You make money when you buy, not when you sell” as often said by Robert Kiyosaki, author of Rich Dad Poor Dad. Just make sure that you really are buying a property below market value by doing your own property valuation.

Now that you know the secrets of buying foreclosures, how do you get started?…

Hold your horses! Before you go out there to start looking for foreclosed properties, make sure you have learned to manage your finances first. Start increasing your financial IQ and be on your way to becoming financially literate. If you can’t manage your cashflow now, you won’t be able to do so when you already have investment properties. Without financial literacy, no matter how many good deals you find, you will surely end up losing money.

SEARCH FOR YOUR CHOICE: For the complete list of ready-to-market foreclosures, go to www.propertyforum.net.ph and utilize the first Philippine real estate search engine.

Sadly, their website is not updated. Don’t worry, as long as I get copies of their foreclosed property listings, I’ll post it here in Foreclosure Philippines.

INSPECT ALL CHOICES: It’s time to go shopping! Prepare a list of choices. Be sure to have made necessary arrangements to be able to enter and inspect the properties. The Property Forum Area partners will help you choose your investment, as all properties listed in our auctions are pre-inspected.

Before inspecting all those foreclosed properties, make sure you have at least analyzed and shortlisted them, and visit only those that look really promising. When inquiring, make sure you also ask the right questions.

GRAB THAT GREAT DEAL: Our auction assets go through a price deliberation process that ensures bidders that they get value for their money. That great deal may be handed to you at even almost half its market value.

Better make sure you really are getting that foreclosed property you are eyeing at below market value by doing your own property valuation as I have mention in my post on how I estimate market values of foreclosed properties.

If you want to be a foreclosure real estate investor by acquiring property, fixing it up, and leasing it out, or you would like to buy a ready to move in house with low down payment, long payment terms, and with the right interest rate, then call us. We will gladly share with you our experience on how do it step-by-step. HAPPY TRIPPING!!! PROPERTY IS PROSPERITY.

Personally, I have found it a pleasant experience in dealing with Property Forum Philippines. I attended my very first auction which was conducted by Property Forum Philippines sometime during the first half of 2007 , and then a year after, I had my first win for a bid for a foreclosed property during a public auction also conducted by them (read more about it near the bottom of this post). I believe they now also offer investors a means to invest passively in foreclosures. I’ll check on this and post more information as they become available.

Happy investing!

—–

To our financial freedom!

Jay Castillo
Real Estate Investor
Real Estate Broker License #: 20056
Blog: http://www.foreclosurephilippines.com
Social Network: http://foreclosurephilippines.ning.com
Mobile: +639178843882
E-mail: ph.investor@gmail.com

Text by Jay Castillo. Copyright © 2009 All rights reserved.

P.S. – If you are a new visitor, please start here to learn more about foreclosure investing in the Philippines.

P.P.S – If you liked this post, don’t forget to subscribe to e-mail alerts and get notified of new listings of bank foreclosed properties, public auction schedules, and real estate investing tips. If your inbox is getting full, you may subscribe instead to my RSS Feed.

Secrets Revealed: Investing in Foreclosures is a post from: Foreclosure Investing Philippines

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I stumbled upon a hot topic at sulit.com.ph about which investment vehicle is better to invest in, real estate or stocks. Of course you would expect me to have a bias towards real estate, but before you make up your minds, let me first try to objectively state the advantages and disadvantages of both real estate and stocks based on what I know. For this first part of a series, I will only be focusing on one aspect, leverage. Leverage generally refers to the use of loans or debt to increase a person’s purchasing power. Let me illustrate further below.

If I had Php100,000 cash, how much real estate would I be able to buy? Most people would answer I can buy a property worth Php100,000, which is true. However, It is also true that I can actually purchase a property worth Php1,000,000 at 10% downpayment with only Php100,000 cash. The Php900,000 would be covered by taking out a mortgage loan from banks. Some would say that this is not possible for all types of properties but I can assure you that this is at least possible for all the foreclosed property auctions I have posted in this blog for the past 2 months.

For stocks however, how much stocks do you think I would be able to buy? The answer of course is I would only be able to buy exactly Php100,000 worth of stocks. What about leverage, can’t I apply the same to stocks? Well, I could try to take out a loan to buy stocks but if I did, the bank officer would probably laugh at me or get mad at me for wasting his time, depending on his mood. It is a known fact that no bank in their right mind would ever lend money to anyone to buy stocks. Why don’t banks give out loans for stock purchases? There are a lot of factors I can think of and I’ll discuss these in the next part of this series.

In the meantime, what are your thoughts about this? Do you invest in stocks or real estate?

See below if you want to read the rest of this article:
Part 2: Less Risks
Part 3: Control

Why Is Investing In Real Estate So Much Better Than Investing In Stocks? (Part 1: Leverage) is a post from: Foreclosure Investing Philippines

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