This lesson may change your view on investing forever
Depending on your age, you may have never heard of Robert Kiyosaki. I only met him once, but he has played a significant part in my financial success and still influences the strategies I use in investing today.
Robert Kiyosaki’s Path To Early Success
Born in 1947 in Hawaii, Kiyosaki began his career as a merchant ship officer after graduating from the U.S. Merchant Marine Academy in 1969. In his role as a ship officer, he was involved in international trade and shipping, which gave him early exposure to global economics and the business world — a hint at where his life was later going to take him.
However, with the onset of the Vietnam War, he first took a tangent from his career to become a helicopter gunship pilot in the U.S. Marine Corps. His experience in the military, particularly his time in combat, is something he has spoken about in his books and interviews, often linking the discipline and lessons he learned in the military to his later success in business.
His first major venture was a company that sold nylon Velcro wallets in the 1970s — the first company to do so. His products became very popular and his business experienced incredible growth, but then collapsed due to poor cash flow management. This early failure was a significant low-point in his career but provided very valuable lessons.
Kiyosaki’s first major break came in 1997 with the self-publication of Rich Dad Poor Dad, which became a bestseller. The book’s simple financial lessons, drawn from the contrasting advice of two father figures, resonated with a wide audience, propelling Kiyosaki to global fame as a financial educator. This success led to a series of books, seminars, and the creation of his Rich Dad brand. He also made considerable financial gains in property investing, using a number of key strategies, which he also taught.
Over the years, Kiyosaki has been scathing of government policies related to taxes, inflation, and the national debt. He has often argued that the government’s approach to money management, including its reliance on printing money and accumulating debt, is unsustainable and harmful to the middle class. A recurring theme in his teachings is his encouragement for individuals to take control of their financial futures without dependence on government support. I have always resonated with this philosphy.
Controversies and Criticisms
Despite his success, Kiyosaki has faced significant criticism. Some financial experts criticized his investment advice as overly simplistic and risky. His involvement in network marketing and promotion of potentially high-risk real estate investing strategies also drew scrutiny.
These controversies tarnished his reputation among more traditional financial circles. This followed in 2012 with Kiyosaki filing bankruptcy for one of his companies after a legal dispute. However, true to his style, he bounced back and continues to be a leader in the wealth education space, even today. His net worth is reported at 100 million dollars in 2024.
An Inspiring Meeting
My interaction with Robert Kiyosaki came in 2011 at a seminar, on maybe his third visit to Australia. Halfway through the seminar we had a ‘meet-and-greet’ opportunity and I remember shaking his hand and having a brief exchange of words.
Two things had made me want to meet him.
Firstly, I had read most of his books to date, and I was in awe of his success.
Secondly, another of my mentors at the time, legendary property investor and educator, Steve McKnight, had met Kiyosaki back around early 2000 and he had said multiple times (and many more times since) that his meeting Kiyosaki was one his turning points.
So, I wanted to meet Kiyosaki too, and I used that meeting to make a decision – at that seminar – that I was going to do whatever it took (ethically and legally of course) to build my wealth to a point of financial independence and safety. And I have.
He taught me one key lesson, which has been the cornerstone of my investing since — which was the principle of ‘Investing for Infinite Returns’.
The Principle of Investing for Infinite Returns
Essentially, this strategy involves:
- Use money (cash) and leverage (a loan) to purchase a cashflow positive asset (often an investment property).
- Implement a Value-Add Strategy to increase the value and yield of the asset (how much money it generates, month-to-month; and how much it will sell for).
- Refinance (as the asset has increased in value) drawing out the money that has been initially put in, then use that cash to buy the next asset.
- Repeat the process.
I remember learning this strategy and being blown away by its simplicity and the potential benefits associated.
Using positive-cashflow property investing (as I did), your rental income covers all your property-related expenses — like mortgage payments, insurance, maintenance, and property management fees — with some money left over. This left-over money is your profit, and can be used in several ways to further your investment goals. Positive cashflow always made sense for me because I never liked to lose money!
The power of this strategy can’t be understated. One of the reasons it is so effective is that the biggest limiting factors for most investors or business owners, are (1) cash and (2) serviceability (the ability to access additional finance and therefore leverage). By combining value-adding with cashflow-positive investing you can maximize both of these.
Furthermore, using this strategy to grow your portfolio size then allows you to optimize your exposure to market growth.
I realized early on that in order to make more money faster, I needed to build a bigger portfolio through a bit of effort and then allow the upward-trending market to take care of further growth.
The trick here is to allow growth for the next market cycle or two, then sell when you can to take out cash, reduce your debt, and recycle your profits into assets with even more value-add potential and/or growth potential.
The Reason That Some Investors Cannot Do This
Some investors shy away from this strategy of Infinite Returns because they don’t want to put in the effort of finding a cashflow-positive property, or value-adding at the beginning of buying an investment. I can understand this.
It IS extra effort.
It can be hard to find the time and it takes more effort to track down deals that are open to effective value-adding.
But the returns are worth it! As the saying goes, no pain, no gain.
My question for you, is what price (pain) will you put on a future of financial freedom or safety (gain)?
The Benefit of Reduced Risk
The other point I want to emphasise is that using this strategy effectively — and without over-leveraging — actually reduces your risk. By adding value at the start, you make more money upfront, and this helps buffer you if the market does fall a little at any point during the cycle ahead.
My Success
I used this strategy to buy 7 houses over a 12 month period following seeing Robert Kiyosaki in Sydney in 2011, then an additional 6 units in 2013 (13 properties in total). Over the next 10 years I saw the value of these investments grow from $1,825,000 to $3,300,000.
The combination of good timing, a good strategy and a bit of effort made over a million dollars profit — including after the tax I paid when I sold and not even counting the cashflow. This set me up for the next stage in my investing portfolio.
Using cashflow-positive property investing, combined with a value-add strategy and leverage, is a powerful way to grow your property portfolio.
These investments were not my first properties, and not my most recent investments, either. But they played a key part of the growth of my portfolio and my learning as an investor.
My advice for anyone wanting to invest in property is to keep learning, and if you haven’t bought your first investment property yet, work on doing everything you need to, to get into the property market.
