Page 134 - Rich Dad's Increase Your Financial IQ: Get Smarter with Your Money

management and development are essential to increasing rents, lowering
expenses, and increasing asset value.

If I had bad partners, bad financing, and bad management, the 300-unit
apartment deal would be a financial disaster. If I were the only one
investing, I would not invest. It is too big and complex a project.
Having control over these three components—good partners, good

financing, and good management—I am more willing to use debt as
leverage. Without control, I would probably not use debt financing. If there
is higher risk, such as speculating in a stock or a commodity, I like to use
only money I can afford to lose.

Higher Returns with Less Risk

I’m going to further explain my confidence in the investment (thanks to my
partners and having control over the 300-unit apartment project), why I am
willing to use a lot of leverage, why I believe the risk is low, how I make

more money, and how I pay less in taxes. There are three more advanced
investment strategies, investment strategies that require a higher level of
financial intelligence. The three advanced leverage strategies are OPM,
ROI, and IRR.

1. OPM: Other people’s money. There are many ways to use OPM. With
the 300-unit apartment building, I am using 80 percent leverage. First of all,

the beauty of using the bank’s money is that it is tax-free money. The other
benefits of the bank’s money are:

Me Bank
1. Appreciation 100% 0%

2. Income 100% 0%
3. Tax benefits 100% 0%
4. Amortization 100% 0%

As you can see from these numbers, the bank puts up 80 percent of the
money but I receive 100 percent of the benefits. What a great partner.