Page 133 - Rich Dad's Increase Your Financial IQ: Get Smarter with Your Money

just be bad or wrong partners for you. For this 300-unit apartment house
project to work, I must be sure I have good partners. My partners are my

wife, Kim; Ken; and Ross. We have done many deals together and have
made a lot of money. We have also run into many problems, and in solving
the problems have become smarter and better partners.

2. Good financing. Real estate is primarily a function of financing. Many
people say, “Location, location, location.” I say, “Financing, financing,
financing.” If you can secure good financing, the deal works. If you have

bad financing, the deal will not. To illustrate my point, let’s say the seller
says, “I want $35 million for my $17 million apartment complex.” If the
seller lets me finance the $35 million purchase price at $1 a month for 30
years with a balloon payment of $35 million at the end of the term, I would

take the deal and give the seller the asking price. At $1 a month for 30
years, I can afford to pay $35 million for a $17 million property. As they
say in the world of finance, “I’ll give you your price if you will give me my
terms.”

I know some of you think $35 million is just an extremely ridiculous
example. It actually is not. In the world of finance, paying ridiculous prices
is pretty common. It is often just a matter of who the buyer and seller are
and their ability to use the power of finance to achieve their goals.

For example, a few years ago, a piece of property came up for sale near
my office. When I asked the broker what the price was, he said $2 million. I
laughed, said he was joking, and left. At best, I thought the property was
worth $750,000. Today, a major hotel chain is putting a flagship property on

that piece of dirt. I do not know what that piece of dirt is worth today, but it
is definitely more than $2 million. As my friend Ken McElroy says, “The
person with the better plan wins.” And as Donald Trump says, “Think big.”
Every time I drive past that property, I say to myself, “Think bigger.”

3. Good management. One of the reasons for my confidence in the $17
million, 300-unit property is that I have good partners. Ken owns a property

management company, and his partner Ross owns a real estate development
company. In the following paragraphs, I will further explain how property