Blog | Real Estate

Loopholes of Real Estate by Garrett Sutton, Esq.

There is a world of real estate investing that the average investor rarely sees. Most people see the dirt, the bricks and the quick flip, or even the monthly cash flow. There is so much more.

When I started investing in real estate I did it just like most lawyers did, I bought low and sold high. I did not understand the specialness of real estate, the advantages that exist through loopholes the government has created or allowed to exist.

When I met Robert Kiyosaki I began to look at real estate as he did. I began to see the tax loopholes that made real estate great and the legal loopholes that required special attention to close in order to keep you and your property protected. I came to better understand the bigger picture of the world of investing. Robert taught me to see real estate as an investor, not just a lawyer. He said, “If you want to be a sophisticated investor, you must train your mind to see what your eyes cannot see.” What my eyes now see are the legal and tax advantages that real estate investing offers the more informed investor.

I wrote my new book, Loopholes of Real Estate to share these secrets. I wanted to share the loopholes that allow successful real estate investors to do it so well. 
You don’t have to be a genius to understand and apply these loopholes. You just have to be willing to follow a proven path toward success. Basically, you need to be smart about following what others have used to their advantage before you.

Most of you who know Rich Dad understand the importance of real estate for your financial freedom. But how many of you actually invest in real estate? I’ve found that while many of you know the benefits of real estate, lack of knowledge and fear stop you from taking action and freeing yourself.

Loophole of Real Estate gives you the knowledge you need to overcome your fear. To help even more, I added a section called “Get in the Game”. This section instructs how to create an investment plan, assemble a team of advisors, and choose investments.

In this blog, lets discuss your real estate game plan. For those of you just getting started, you’re wondering where to begin. And the answer is, with taking a good, hard look at your financial affairs in order to develop an accurate, comprehensive financial report card.

Step #1: Preparing Your Financial Report Card

You can’t move forward until you determine where you are right now. Unfortunately, this basic premise is overlooked by many investors, and it’s a crucial foundation for success.

Start creating your financial statement by developing an income statement that lists your monthly income and expenses. If you’ve played the CASHFLOW board game you’ll be familiar with this. Once you fill out the financial statement from the game with your own information you’ll know exactly where you are. To get a free income statement form go to: http://www.richdad.com/Resources/Tools.aspx#financial-statement

Your personal financial statement will bring your financial goals into sharp relief. You’ll see where your debt is concentrated or how to pay it down, and you might see where you could bolster your asset column. It may lead you to form a plan to decrease expenses or increase income. Some decide to downsize their homes in order to free up some money for investment, while others may opt to rent out their existing home and move to a smaller home to generate cash flow, increase passive income and decrease expenses. Only you can decide how to address your financial situation. Seeing your assets and liabilities in black and white will open up a lot of possibilities you hadn’t considered before.

Step #2: Setting Your Real Estate Goals

Passive income is the suggested method for growing wealth. It is not only the fastest method, but is also the easiest, because it means other people’s money, time, and energy are working for you.

If you’re like most people, your financial report card reveals that zero percent of your income is passive. So your first step is to determine what percentage of your income you’d like to make passive. Start with where you’d like to be one year from now, as well as a longer-term goal of five years from now. What would a reasonable monthly passive income goal be? $1,000? $5,000? $10,000? More than that?

Remember that your goals are dependent on what you’re willing to do to make them happen. Know that you can also recalibrate your goals down the road as you learn more and determine what works and what doesn’t.

You’ll want to determine something specific—how much you want to save, how much of an initial investment you plan to make, what you’ll do with that initial investment, and over what period of time.

For example, maybe you’ve decided that within six months, you want to save $10,000, which you’ll then turn around and invest into a piece of rental property by the end of one year. If this is doable for you, it’s a worthy goal. From there, perhaps, you might decide that within ten years you want to have five rental properties.

Beyond that, you have other decisions to make: What kind of properties you’ll invest in, where, and what to do with them.

The following are your numerous real estate options: • Single-family homes
• Condominiums
• Duplexes• 4plexes
• Trailer parks
• Apartments
• Commercial office space
• Commercial industrial space• Store front retail • Hotels
• Motels

Each of these has its own choices as well—apartment complexes vary in size, so are you interested in 20-unit complexes, 100, or more? Starter- market or high-end gated communities? High-rise office, strip-mall retail... your choices are plentiful.

Then you must decide where you want your properties to be. Are you looking for properties nearby in your town, in a neighboring town, in another state, near water, urban, rural?

Now, what will you do with the property? Will you focus on flipping and capital gains? Will you follow the Rich Dad strategy of buy, hold, and rent, earning both appreciation and cash flow? 


The Wisdom of Investment Specialization

Because the real estate world offers so many options, it’s a good idea to focus on a particular area of specialization. For instance, you might become an expert in buying, holding, and renting small, one and two-bedroom apartment buildings in a particular area of town. Perhaps you used to live in an apartment in that area years ago and understand the needs of that community and that type of resident. Each geographic area has its own unique dynamic, its own zoning regulations and its own distinctive resident, so it’s a good idea to focus on one particular area. As you become an expert in one investment area, you will be more apt to learn another area quickly.

When you assemble your team of advisors, one of them will be your real estate agent. He or she will be an expert in one particular sector—the one you’re investing in—but most likely won’t be an expert in other sectors. For example, he or she might specialize in duplexes, but not strip malls.

So by sticking with one sector, you can retain the same team of advisors without having to seek others. And as far as your team is concerned, it’s best to find them, understand their strengths and use them as your investment vehicle. This leverages experience. When you’re ready to broaden your investment horizons, you can seek new team members.

Don’t let fear and lack of knowledge stop you. Get educated and follow these steps to getting started and taking that leap of faith. I wrote Loophole of Real Estate to help overcome fear and lack of knowledge, but you have to be the one who does it.

To purchase Garrett’s latest book, Loopholes of Real Estate, click here.

About the Author

Garrett Sutton, Esq., is the bestselling 
author of Start Your Own Corporation, Run
Your Own Corporation, The ABC’s of Getting
Out of Debt, Writing Winning Business
Plans, Buying and Selling a Business and The 
Loopholes of Real Estate in Robert Kiyosaki’s
 Rich Dad’s Advisors series. Garrett has over 
thirty years’ experience in assisting individuals
 and businesses to determine their appropriate
 corporate structure, limit their liability,
 protect their assets and advance their financial, personal and credit success goals.

Garrett and his law firm, Sutton Law Center, have offices in Reno, Nevada, Jackson Hole, Wyoming and San Francisco, California. The firm represents many corporations, limited liability companies, limited partnerships and individuals in their real estate and business-related law matters, including incorporations, contracts, and ongoing business-related legal advice. The firm continues to accept new clients.

Garrett is also the owner of Corporate Direct, which since 1988 has provided affordable asset protection and corporate formation services.