Author who taught ways to get rich has $1.2 billion in debt

Robert Kiyosaki, author of Rich Dad, Poor Dad, has come under renewed attention over his massive debt burden. A report claims that around $1.2 billion in debt is tied to the real estate investments of the author who became globally known for teaching strategies for financial success.

Kiyosaki (79), has spoken about his massive debt for years. He claims that taking on debt to buy assets that generate income is a strategy used by wealthy people.

Recently, Kiyosaki said on the Get Rich Education podcast, “I’m $1.2 billion in debt.” At the same time, he warned, “Don’t do what I do.”

However, Kim Kiyosaki, Kiyosaki’s former wife and business partner, said there is significant misunderstanding about the $1.2 billion debt figure. It is not Robert Kiyosaki’s personal debt.

In an interview with Vanity Fair, Kim said they own around 1,500 apartment units with partners. Large amounts of debt have been taken against these properties. Therefore, while the debt technically amounts to $1.2 billion, only a very small portion of it is Kiyosaki’s personal liability.

According to the report, the massive debt was created because of Kiyosaki’s investment strategy. As property values increase, he takes on more debt against the increased value. Because he borrows money instead of selling the properties, the money is generally considered tax free debt.

In addition, Kiyosaki keeps his various investments under separate “limited liability companies” or LLCs. This makes it possible to protect other assets from the impact if a problem arises with any one investment.

Describing his strategy, Kiyosaki said that even if everything goes to “hell,” he would have to talk to his lawyer. He also said wealthy people invest this way by creating “firewalls.”

According to Vanity Fair’s calculations, Kiyosaki earns around $3 million a year. If this calculation is accurate, his personal share of the total debt could be approximately $30 million to $60 million.

David A. Perez, founder of Tax Maverick AI and a real estate investor, described Kiyosaki’s strategy as a “good strategy.” According to him, taking large loans against properties is not unusual in the real estate business. However, it can increase mortgage payments and interest costs and reduce cash flow.

Meanwhile, John Poole, founder of JPTD Partners, offered a stronger warning, saying debt can be good or bad. However, when taking on $1.2 billion in debt, a person must know what they are doing.

According to him, an investment strategy based on debt works well when asset values are rising. But when that upward trend stops, it can create a severe financial risk.

Robert Kiyosaki has built a massive financial education empire around his book Rich Dad, Poor Dad. The book was first published in 1997 and has sold more than 44 million copies worldwide, according to Vanity Fair.

In the book, Kiyosaki presents his own father as the “Poor Dad” and the father of his childhood friend as the “Rich Dad” to compare two different perspectives on money and investment.

Kiyosaki has long advised people to invest in income generating assets such as real estate, reduce taxes and distinguish between debt taken to invest and debt taken to cover everyday expenses.

Source: New York Post (Adapted)