In a $1.2B dollar debt, How do you still smile and even sleep at night?

[Fiatless]

Your thoughts, arguments and contributions are welcome and thanks for reading.

The rich also use debt to avoid or defer tax payments. As the value of the real estate they bought with loans increases, they don't pay tax since it is considered an unrealized gain. Instead of disposing of an asset, which would attract capital gains tax. Rich people use assets as collateral to take loans, and gains from loans are not taxable in some countries.  

Robert Kiyosaki and others know how to manipulate the financial system to their advantage. The rich pays lesser taxes even when they earn more from the system.

[Cryptomultiplier]

Your thoughts, arguments and contributions are welcome and thanks for reading.

The rich also use debt to avoid or defer tax payments. As the value of the real estate they bought with loans increases, they don't pay tax since it is considered an unrealized gain. Instead of disposing of an asset, which would attract capital gains tax. Rich people use assets as collateral to take loans, and gains from loans are not taxable in some countries.  

Robert Kiyosaki and others know how to manipulate the financial system to their advantage. The rich pays lesser taxes even when they earn more from the system.

I have read more than two books authored by Robert Kiyosaki and the bottom line is that he pays less taxes that an average citizen because he knows how to service his taxes through the corporations he has built and that makes him acquire anything he wants through the corporations without using his personal funds that may incur huge taxes.
The rich simply know how to manipulate the system to their advantage because they understand how money flows and they can take loans because they have assets on ground that is an equivalent without ever having the worry or feel the pressure to pay back in a rush because of the systems they have built on ground.

[freedomgo]

I guess being in huge debt does not make you totally poor, as long as you know for yourself that what you are doing is a good debt that would acquire assets that will generate unstoppable profits in the future.

But if you are drown into debt because of buying depreciating liabilities, well you have made the worst decision ever. Its normal to fall into debt, but letting yourself get drowned by useless stuffs just to gain life's luxury, that will definitely make your peaceful life messy and miserable. Some may even end up with suicidal thoughts especially if they are dealing it alone.

[tabas]

I have read an interesting comment about his situation, so this isn't my personal opinion on it and it says; "If you owe the banks thousands, you're in trouble. But if you owe the banks in billions, they are in trouble". He's probably got his assets in collateral and that's why it's not that hard for him to brag about his debt with them. They can take away his assets for real and he knows that he's near at the end of the tunnel and that's why he doesn't mind that much, there's nothing going to change if he's going to think a lot of it and why not just take that good sleep at night.

[Fortify]

I learnt that there are two types of debts..

• Good Debt
• Bad Debt

Now, why is Robert kayosaki's $1.2B dollar debt a Good Debt?
Robert and his partners(business associates) took the loan of $1.2B to finance a real estate purchase of 1,500 units of houses, in the future, part of the income generated from each of this buildings can peharps, be used to service/payoff this debt.

Your thoughts, arguments and contributions are welcome and thanks for reading.

I think this ties in with what Warren Buffett once said: the only good debt is a mortgage, but even then he was only referring to your own private home and not this massive corporate house buying exercise. Who know's if this does turn out to be a worthwhile purchase, it'll only become obvious maybe decades down the line when renters have effectively paid off the money that was borrowed. While there is a case to be made that corporations should be able to buy homes, it does really corrupt the market to have one entity owning so many (multiplied this by thousands of companies/groups/people trying to do the same thing). If this continued the natural conclusion would be that individuals and families could no longer own homes, because they are snapped up by faceless entities who have much more money to spend, which is akin to being feudal peasants renting from a lord. I don't see a problem with someone owning 2 or maybe even 3 homes, but this industrial scale capture just seems wrong and should be a heavily taxed business to discourage it. It's always interesting when these people who act like oracles of financial knowledge and saviors to people then go into being a leach on society like this. Owning homes doesn't create value.

[savetheFORUM]

I think that's pretty common for every major businessman or business owner, they call them 'Strategic Financial Tools' instead of debts, and they know exactly what they are doing with that. Elon Musk is the richest person in the world, he crossed $1T in his net worth earlier this year, which came down later when their shares dropped, but is still sitting above $900b. And, he and his companies have more debt that you mentioned, or I should say way more, because last time I checked it said somewhere above $12B for him and his companies, but that doesn't mean they are bankrupt or his companies are at a loss, because they use the money they borrow wisely as you described, so instead of using their own money for doing something, they borrow, invest, and repay with the revenue made.

Another very interesting thing about this that you didn't mention is the credit scores they have. A credit score is a number that indicates how likely you are to repay a loan, and each loan you take and repay will have either a positive or a negative effect on your credit score. So, if a company takes a loan, and then repays the loan on time or before time, their credit score increases, which makes them eligible for bigger loans, and that's how these businesses manage to get so many loans because they have very high credit score, because obviously, the banks or companies that are lending them money are not doing it for nothing.

[icebar]

Everyone should know about loans. Taking a loan does not mean that it is bad, and taking a loan cannot be said to be good either. It will depend entirely on what the loan is being used for. When a person takes a loan only for his luxury, it will definitely fall into bad debt because that loan will bring more disaster to the borrower. On the other hand, if it is used for good purposes, that is, if it is used for a profitable purpose and there is an opportunity to repay the loan from there, then it will definitely be a positive aspect for the borrower.

Before taking a loan, we will never understand that by using our loan money in a profitable field, we will definitely get a profit. That is why I definitely do not support taking a loan if we do not have the ability to repay it. If someone thinks that he will make a profit by investing the loan money in a business and will repay the loan with that money, then even if the plan is good, there is no guarantee that he will be able to repay the loan. Therefore, before taking a loan, one should definitely take a good look and make a decision.

[Josefjix]

Which ever ventures that lends that amount of money to Robert Kiyosaki trusts in his team to deliver the returns whenever, the same venture can never lends another person even smaller amount, the kind of person that ask for loan matters and so they'll give him freely without much argument and questioning.

I don't care what Robert uses the loan for, either real estate or whatever, it's non of my business.

What matters is the caliber of person that asks for loan, no matter the amount, it will be given to him because he has paid the price to be known as the world financial advisor and worth it. I was even thinking maybe the institution that gave him the loan had sued him to court to repay back the loan.

[bhadz]

Another very interesting thing about this that you didn't mention is the credit scores they have. A credit score is a number that indicates how likely you are to repay a loan, and each loan you take and repay will have either a positive or a negative effect on your credit score. So, if a company takes a loan, and then repays the loan on time or before time, their credit score increases, which makes them eligible for bigger loans, and that's how these businesses manage to get so many loans because they have very high credit score, because obviously, the banks or companies that are lending them money are not doing it for nothing.

Yeah, they have the credit score and I guess that the banks are not ignorant about that which lent him so much money. They have the background checking and it's not only about his name and what he does but what he's got. And they've lent him with so much money that can be more than the total assets that he's got. He's got the capacity to pay for it and that's a special case for him because as long as the banks have decided to lend someone a lot of money, they know that they can pay it back at the right time. It's funny that we discuss his loans and what he's got but I understand it becaus he's a public figure but his situation can't be applied to most of us.

[Churchillvv]

Good debt is below your networth
Bad debt is above your net worth.

If you have 10 billion worth of assets that can be used as collateral for debt then you can go as much as 2 billion debt because if they liquidate your assets you can pay it off and still not be broke. That’s exactly how rich dudes operate but then, they use this debt since liquidating their assets will means taxing, they use this debt since it’s not taxable and buy whatever they want and then use the profit to pay off and also buy more assets that can be used as collateral against the current debt.

With this I can sleep at night with any amount of debt as long as it’s below my assets that can be used for collateral.

But however, for the comments; I might agree that some made the comments out of ignorance while some are fully aware but creating humour as social media operates on humour.

[STT]

Realistically speaking, he is so old its closer to someone else's problem then anything that should really trouble him personally.  He does benefit from the setup, whether it works out in closing, how well or balances at all is for others to find out some time after he is gone.  Its like the bank let him take out a 25yr mortgage when he was 75 years old already.

[Free Market Capitalist]

Realistically speaking, he is so old its closer to someone else's problem then anything that should really trouble him personally.  He does benefit from the setup, whether it works out in closing, how well or balances at all is for others to find out some time after he is gone.  Its like the bank let him take out a 25yr mortgage when he was 75 years old already.

The bank doesn't grant him the mortgage as an individual; it grants it to his company. His age doesn't matter. And if the bank grants it, it's because he has an excellent track record of repaying similar debt in the past, a good debt-to-equity ratio, and a risk analysis that approves the transaction. Even if he dies, the company will continue to operate, manage the rentals, and repay the debt.

His friend Ken McElroy also has huge debt but in his Youtube channel he explains quite well how they carry out these operations and why they operate that way.

[fruktik]

It may seem strange, but I'm one of those people who considers all debt bad. And what happens to this debt if the real estate market drops in price in the future or demand for it drops significantly? What then? Will the debt pile up even more? No, let Kiyoska live by that principle. He's already talked a lot of nonsense, and made his fortune selling books to naive people. That's the only thing he's good at. As for crypto, it's ridiculous to even talk about it.

[WillyAp]

Life goes on even if the Staates declare chapter 11.
Nature doesn't even notice.

[Alpha Marine]

He owes only a portion of that $1.2 billion. I don't know how much he owes exactly, but he certainly isn't owing $1 billion.
No matter the type of debt, it would be bad for someone with a net worth of around $100 million to have a debt of $1.2 billion.

First, it seemed really unpleasant to learn that a prominent figure considered by many to be one of the best financial advisors would get into such debt.

I don't consider him one of the best financial advisors, and people who know anything about finance shouldn't either. Even his most popular book isn't very realistic. He has had bankruptcies and makes very silly and unrealistic financial predictions.

It may seem strange, but I'm one of those people who considers all debt bad.

The financial market will not work without debt. The economy would not grow without debt. All debts are not bad. You cannot run a company on a certain level without debt. You can't have enough money to finance all your projects, and even if you have, you can't use every single penny you have to finance the project. You need funding from somewhere, and that comes in different forms, including debt financing.

[robelneo]

The reason is simple, I went through comments on this subject on social media and I realized how ignorant most people are on the issue of debt, many people think all debts are bad, which is wrong.

Even the biggest companies and powerful countries run into debt; debt is inevitable to sustain and protect your business. The most important thing is managing your debt, understanding how it works, and avoiding turning good debt into bad debt.

People who think they don't need to take a loan are either not business-minded or not running a business, and part of financial liberation is using a loan to move your finances forward.

[fruktik]

The financial market will not work without debt. The economy would not grow without debt. All debts are not bad. You cannot run a company on a certain level without debt. You can't have enough money to finance all your projects, and even if you have, you can't use every single penny you have to finance the project. You need funding from somewhere, and that comes in different forms, including debt financing.

No, I am categorically opposed to starting a company with borrowed money. I certainly don’t see myself as that kind of person. I’ve seen plenty of examples of this. Just recently, for instance, a situation like that played out involving dozens of marketplace sellers: they took out bank loans to launch their businesses, only for a drone to strike and the warehouse to burn down completely. Now, not only have they lost their businesses, but they are also left with massive loan obligations to the banks. How will they ever pay off such huge debts? That remains a mystery to me. Many of them say their lives have been destroyed and shattered.

[Alpha Marine]

No, I am categorically opposed to starting a company with borrowed money. I certainly don’t see myself as that kind of person. I’ve seen plenty of examples of this. Just recently, for instance, a situation like that played out involving dozens of marketplace sellers: they took out bank loans to launch their businesses, only for a drone to strike and the warehouse to burn down completely. Now, not only have they lost their businesses, but they are also left with massive loan obligations to the banks. How will they ever pay off such huge debts? That remains a mystery to me. Many of them say their lives have been destroyed and shattered.

You're looking at only small businesses. You can start a small business with money you save up or with other business partners where you all contribute to the business, but if you want to start a big project or company, you can't fund it alone. If you say you would never do a business where you alone cannot fund it, then no problem, but there is no way a person will take on a project that is worth $3-$5 million, and they're worth only $1 million, and you won't take loans or look for investors.
For the small business level, we can take it on our own, but you can't do that in a big project. Even Elon Musk as rich as he is, would not be the only one to fund a $10 billion project. He would look for investors and seek funding through various means. 

[EluguHcman]

Why did i decide to create this post?
The reason is simple, I went through comments on this subject on social media and I realized how ignorant most people are on the issue of debt, many people think all debts are bad, which is wrong.

I think those throwing shades on Robert Kiyosaki the author of the Rich dad and Poor dad where only negatively centered otherwise, they should understand that even the government of countries are in debt of funds being borrowed to process public projects which either be with the objective to create job opportunities or any means of entrepreneurship that would produce revenues for the country or environmental development projects.

Of course the great USA which holds the strongest economy factors are in debt, so why can't a sole business person, cooperative organization also borrow? For goodness sake the author of the book is just a business and entrepreneurial advisor.
So possibly with his knowledge in economy and business factors, he may have foreseen possibilities of creating wealth in the business ideal which lead to his corporative get the debt. Perhaps making wealth is all about strategic plan and risks.
So the need of the debt was positive since it was for investment.

[Taricoins]

Why did i decide to create this post?
The reason is simple, I went through comments on this subject on social media and I realized how ignorant most people are on the issue of debt, many people think all debts are bad, which is wrong.

They are not so ignorant, if you notice the first comment, 'Rich Dad, Broke Dad'. Kiyosaki has gone bankrupt several times; the most high-profile and recent instance was the bankruptcy of his company, Rich Global LLC—which, given that name, is pretty bold. The system he uses makes sense; it has allowed him to become very wealthy, but it isn't suitable for the average person.

And as for the question of the title he sleeps well at night because his net worth is greater than that debt, he has cash reserves and uses the cash flow from that real estate to pay off the debt and get richer.

I think that is a very big misconception, the bankruptcy wasn't on he himself [Kiyosaki], he wasn't bankruptcy but the LLC was the one that was affected after the court verdict, Kiyosaki's net worth offsets this huge amount of debts he acquired, I think that was where the OP said good debt. The big problem is that is the investment of those amount of units worth the debt he carried and what will happen if this project was to fail. This is a huge risk.