Leveraging "Good Debt" for Profitable Property Investments: A Lesson from Robert Kiyosaki

Introduction: As a passionate follower of Robert Kiyosaki, the renowned author of "Rich Dad Poor Dad," I have been inspired by his unique perspective on money and the flaws in our education systems. While his investment strategies primarily revolve around the USA market, our shared love for properties unites us. In this blog, I aim to discuss the concept of "good debt" versus "bad debt," as highlighted by Kiyosaki, and showcase a potential property investment scenario where good debt can be acquired.

Understanding "Good Debt" and "Bad Debt": In his books, Kiyosaki emphasizes the importance of making clever decisions when it comes to debt. He distinguishes between "good debt" and "bad debt" to help individuals make informed financial choices. To illustrate these concepts, let's explore two scenarios.

1. "Bad Debt": Imagine purchasing an expensive watch using your credit card and being unable to pay off the outstanding balance. If you continually pay interest on this liability, it falls into the category of "bad debt." Such debt drains your finances without generating any returns or benefits.

2. "Good Debt": Now, let's shift our focus to "good debt." Consider a property in International City valued at AED 200,000. Banks currently offer an 80% loan-to-value ratio on these properties. Here's a closer look at an example:

Property Price: AED 200,000 Down Payment Required: AED 40,000 Loan: AED 160,000

Monthly Payments (20 years): AED 1,100 Yearly Payments: AED 13,200

Additionally, the property generates a rental income of AED 21,000 per year, with service charges amounting to AED 2,500 per year.

Calculating the Cash Flow: By considering this investment opportunity, you can achieve a yearly cash flow of AED 5,300. This aligns with Kiyosaki's definition of "good debt," as it puts money back into your pocket annually. The current market conditions, characterized by low interest rates and reduced property prices, make this an opportune time to explore investments with such favorable cash flows.

Capitalizing on Appreciation: What makes this investment strategy even more enticing is the potential for property value appreciation. As the value of your property increases, you have the option to borrow against its newfound equity. At this point, any positive cash flow becomes an infinite return on your initial investment, as you have effectively recouped your initial outlay.

Conclusion: As an ardent follower of Robert Kiyosaki's principles, I firmly believe that understanding the difference between "good debt" and "bad debt" is crucial when considering investment opportunities. The scenario outlined above demonstrates the potential profitability of leveraging "good debt" in the property market. With low interest rates and attractive property prices, now is an opportune time to explore such investments. However, it's important to note that market conditions can change, affecting prices, loan rates, and other figures. Therefore, thorough research and ongoing assessment are essential.

By adopting a strategic approach, making informed decisions, and taking advantage of market opportunities, you can embark on a path toward financial success in the realm of property investments. Let Robert Kiyosaki's insights inspire you to think differently about debt and unlock the potential for long-term wealth creation.

PLEASE NOTE: ALL PRICES, LOAN RATES, AND OTHER FIGURES ARE SUBJECT TO CHANGE.