Rich Dad Poor Dad: What the Rich Teach Their Kids About MoneyThat the Poor and Middle Class Do Not!

7. Be an Indian giver: the power of getting something for nothing
When the first European settlers came to America, they were taken
aback by a cultural practice some American Indians had. For example, if a
settler was cold, the Indian would give the person a blanket. Mistaking it for
a gift, the settler was often offended when the Indian asked for it back.
The Indians also got upset when they realized the settlers did not want
to give it back. That is where the term “Indian giver” came from, a simple
cultural misunderstanding.
In the world of the asset column, being an Indian giver is vital to
wealth. The sophisticated investor’s first question is: “How fast do I get my
money back?” They also want to know what they get for free, also called a
“piece of the action.” That is why the ROI, or return on investment, is so
important.
For example, I found a small condominium that was in foreclosure a
few blocks from where I lived. The bank wanted $60,000, and I submitted a
bid for $50,000, which they took, simply because, along with my bid, was a
cashier’s check for $50,000. They realized I was serious. Most investors
would say, “Aren’t you tying up a lot of cash? Would it not be better to get
a loan on it?” The answer is, “Not in this case.” My investment company
uses this condominium as a vacation rental in the winter months when the
“snowbirds” come to Arizona. It rents for $2,500 a month for four months
out of the year. For rental during the off-season, it rents for only $1,000 a
month. I had my money back in about three years. Now I own this asset,
which pumps money out for me, month in and month out.

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The sophisticated investor’s first question is: “How fast do I get
my money back?”
The same is done with stocks. Frequently, my broker calls and
recommends I move a sizable amount of money into the stock of a company
that he feels is just about to make a move that will add value to the stock,
like announcing a new product. I will move my money in for a week to a
month while the stock moves up. Then I pull my initial dollar amount out,
and stop worrying about the fluctuations of the market, because my initial
money is back and ready to work on another asset. So my money goes in,
and then it comes out, and I own an asset that was technically free.
True, I have lost money on many occasions, but I only play with money
I can afford to lose. I would say, on an average 10 investments, I hit home
runs on two or three, while five or six do nothing, and I lose on two or
three. But I limit my losses to only the money I have in at that time.
People who hate risk put their money in the bank. In the long run, safe
savings are better than no savings. But it takes a long time to get your
money back and, in most instances, you don’t get anything for free with it.
On every one of my investments, there must be an upside, something
for free—like a condominium, a mini-storage, a piece of free land, a house,
stock shares, or an office building. And there must be limited risk, or a low-
risk idea. There are books devoted entirely to this subject, so I will not talk
about it here. Ray Kroc, of McDonald’s fame, sold hamburger franchises,
not because he loved hamburgers, but because he wanted the real estate
under the franchise for free.
So wise investors must look at more than ROI. They look at the assets
they get for free once they get their money back. That is financial
intelligence.