Page 131 - Rich Dad's Increase Your Financial IQ: Get Smarter with Your Money

flippers. Their investment objectives are generally to buy low and sell high.
When you look at the CASHFLOW Quadrant, traders and flippers are

actually in the S quadrant, not the I quadrant. They are considered
professional traders, not investors. On top of that, in America, traders and
flippers are taxed at the higher S quadrant tax rates and do not enjoy the
benefits of the tax breaks the I quadrant receives.

2. Those who invest only for cash flow. Many investors like savings or
bonds because of the steady income. Some investors love municipal bonds

because they pay a tax-free return. For example, if an investor buys a tax-
free municipal bond paying 7 percent interest, the effective return on
investment (ROI) is the same as receiving a 9 percent taxable return.
In real estate, many investors love triple net leases (NNN). With NNNs

investors receive income without the expenses of taxes, repairs, and
insurance. The tenant covers those costs. In many ways, a triple net lease is
like a municipal bond, because a lot of the income can be tax-free or tax-
deferred.

While I love triple net properties, as expected, the trouble is finding a
good property with a good tenant willing to pay a high return. Today, as I
write, most NNN properties are only paying about a 5 percent to 6 percent
return. Not that exciting. The good news is that if I dig deeper, which I will

go into later, I might be able to find a property with a much higher return,
all the while using more leverage and my bank’s money to lower my risk,
which is why I prefer triple net real estate over tax-free municipal bonds.
This leads us to the third type of investor.

3. The investor who invests for capital gains as well as cash flow. Years
ago, old-time stock investors invested for both capital gains and cash flow.
Old-timers still talk about the price of a stock going up as well as paying the

investor a dividend. But that was in the old economy, the old capitalism.
In the new capitalism, most paper investors are looking for the quick
buck, to make a killing. Today, the big investment houses are hiring the

smartest whiz kids out of college and using the power of supercomputers
and computer models to look for the slightest market patterns they can