What I Learned From Robert Kiyosaki About Surviving an Economic Recession

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Have you ever been frustrated by the false promise an article or speaker delivers in their headline but fails to deliver on in the actual speech? You know, the kind of heading that tells you how to make money in real estate, then says the secret is “Work hard, do your due diligence, and network!” This kind of advice seems to be flooding the internet right now. The authors are so general in their message, so watered down in their advice, that it really doesn’t do anything for you at all.

You click expecting lemonade. The article is equivalent to that little slice of lemon in your water that barely makes a difference at all. Best case scenario is you don’t swallow a lemon seed.

I hate this stuff. It ruins the credibility of good authors, and it reinforces a sense of hopelessness that is bound to come when you get disappointed. Getting your hopes up that you’re going to read what you’ve finally been needing just to end up feeling like a fool because you wasted 10 minutes of your life to read the same stuff you already knew is never a positive experience. If someone has a reputation as a successful investor with extensive experience, I expect more actionable advice than the standard “work hard, be smart, take action” advice that any Joe Blow can provide.

The worst is when it comes from a credible source. Someone who is known for being successful, who you know has good information to share, but still they water down their message so much it’s practically useless.

Why does this happen? Well, I think it boils down to two reasons.

  1. They don’t want more competition by giving away their best secrets when there is nothing in it for them.
  2. They don’t want someone else “exposing” them as a fraud, so they keep things as general as they can.

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The Advice Robert Kiyosaki Had to Give

I realized this last year in Lake Tahoe when I got to meet Robert Kiyosaki. If that name doesn’t ring a bell, he is the best-selling author of Rich Dad Poor Dad. He’s also an insanely successful businessman with a net worth in the vicinity of 80 million dollars. If you haven’t heard that name, listen to just about any BiggerPockets podcast and wait for the end when they ask the guests for their favorite real estate book. Just about everyone says Rich Dad Poor Dad. Mr Kiyosaki was brought in to speak to an investment group I belong to and gave a speech that detailed his history, his philosophies, and his financial opinion on the state of the American government. When the speech ended, he opened up the room for questions.

Related: Want to Build Wealth for Your Family? Then Your Household NEEDS This.

As you can guess, pretty much everyone in the room asked the same stinking question — “What should I buy and where?”

We all wanted the secret, right? What does financial genius Robert Kiyosaki know that I don’t? How can I copy him and score big without doing all the research he does? I’m sure this isn’t an isolated problem for Mr. Kiyosaki. My guess is Warren Buffet can’t go anywhere without someone asking him what the market is going to do. Same for Donald Trump, Gary Vaynerchuk, or Steve Jobs when he was around. We all want the secret.

Now, I noticed Robert Kiyosaki seemed to be making a lot of effort to answer our questions without giving an actual answer. I’m sure you’ve seen this before. He would say he’s buying oil, but he wouldn’t tell us by which means. He would tell us he’s buying real estate, but he wouldn’t tell us where or why.

I think he just didn’t want someone to follow his advice, have it go bad, and then be held responsible for giving my advice. Heavy is the head that wears the crown, and there is a lot of pressure that goes along with being as successful as Mr. Kiyosaki.

The 5 “G’s” That Hold Value During Recessions

Now, after a lot of prodding, he did tell us there are 5 “G’s” he has learned will always go up in value during a recession. Without further ado, they are:

  1. Ground (real estate)
  2. Guns
  3. Grub (food)
  4. Gasoline
  5. Gold

Robert said he has made a career out of researching different economies and what happens when they collapse. Now, I’m inclined to believe this. I know when I started to accumulate a nice little amount of wealth, I got a lot more interested in researching the global economy. At first, you’re trying to grow wealth. Once you get a little, you get a lot more interested in preserving it. Robert Kiyosaki has an estimated 80,000,000 reasons to be interested in learning about economies, specifically recessions. I can imagine he’s pretty motivated to do so.

Robert went on to explain that when an economy fails, fear takes hold. People start accumulating things they believe will keep them safe. If you happen to own these things, people will pay a lot of money to buy them from you. Robert shared one story of a man he knew who started buying massive amounts of ammunition in 2008 when there was talk of the economy tanking. A few years later, when the country in Africa he lived in fell into economic turmoil, he sold that ammunition for something like an 8,000% mark-up. That’s a pretty penny. This man realized people were terrified and would pay anything to feel safe. Guns obviously make people feels safe in chaotic times, and the theory is they will sell for a premium because of that.

Gasoline falls into this same category. When you aren’t sure if gas stations are going to stay open, everyone wants to stock up on gas. Companies that make gas can do very well.

Related: What Warren Buffett Just Told Me About Real Estate is Great News for Investors

Grub is obvious. Owning food is vital to life. A starving person will pay anything to feed their kids. However, Robert took a bigger approach to this concept and wanted to own the land that grew food. This qualifies for two of the “G’s” (ground and grub) and Robert believed the research showed the people who owned food producing land at times of recession did very well.

This brings us to the final two “G’s.” Gold and ground. Now, Gold performs well in any downturn. It doesn’t take a huge recession. People flock to gold because they believe it contains an inherent value when a countries currency value is in flux. Gold is considered a standard of sorts, and people feel safe owning it or accepting it as payment when they are unsure what their national currency is going to do.

Now for the most relevant “G.” Ground. Ground is real estate, and that is what we are here to discuss. When an economy goes into a huge tailspin, there are several ways it can work itself out. One of the most common is by printing more money to pay its debts. Doing this devalues the currency. The less the currency is worth, the higher inflation goes. In times of inflation, owning real estate is your best friend. Your property values rise. Your rents rise. Your payments stay the same. In addition to your property being worth more and bringing in more money, you also will be paying back the money you have borrowed at a much cheaper rate than what it was worth when you bought the house with it. Double score. If I know inflation is going to hit, I want to borrow and owe as much money as possible. Robert Kiyosaki realized this to be the case and recommended ground, or real estate, as a great thing to own during a recession.

Another reason real estate does well in a recession is people circle the wagons and cut expenses. Most people feeling economic fear will only spend money on what is needed. Real estate provides shelter, and shelter is vital. Owning a fancy restaurant during a recession would be bad. Same goes for a luxury car dealership. But a landlord of cash flowing, high demand, well cared for rental property? That’s usually a good place to be. Your investment can pay for itself, and people will always need somewhere to live. While it’s true that vacancies may go up if people are losing their jobs, it’s also true that others will be losing their houses and need somewhere to live.

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Hope for the Best, Prepare for the Worst

There are many theories as to what is going to happen in the American economy and if we are currently in a recession, headed towards a recession, or in an economy that is doing great. Regardless of what you believe to be the case, it is wise to consider a worst case scenario and have a plan in place to protect your wealth and the means to provide for your family should it ever occur.

It is hard to get a successful person to share actionable tips like Mr. Kiyosaki eventually did, and I hope you find them to be helpful and useful. Remember that more wealth is built during downturns in the economy than any other time. Be researched, be prepared, and be ready to strike when the iron is hot!

Have some advice for things you’ve learned during a recession?  

I’d love to hear more about it in the comments below.

About Author

David Greene

David is a real estate investor/agent/author/entrepreneur/police officer in the CA SF Bay Area. David's goal is to achieve total financial independence through real estate and to help as many others do so as possible. When not hunting bad guys, he hunts deals and loves talking real estate. To learn more about David, visit his website where you can also sign into his free investor's newsletter and follow along as he walks you through his deals and shares his latest projects.

32 Comments

  1. Charles Morgan

    I had only 2 rentals in 2008 during the crash and I wish I had more. I was collecting the same rent I had been getting and was able to up the rent on one when the current tenants moved out.
    I love RE for recession resistance.

  2. Jared Garfield

    David,

    That’s a really well written blog, and you underscore some really good points. Your writing style is engaging, and your encouragement to learn about macroeconomic forces is timeless. Having worked for Robert’s organization for three years, I will say that he always stressed that “Investing isn’t dangerous, investors are.” He wants people to learn by assembling power teams, gaining education, (and unfortunately – and the reason I left, paying up to $130,000 for seminar weekend packages). His books are so valuable, but the pricey education is a waste for most people who don’t have the resources to apply it anyway.

    Ultimately, what’s very safe for one investor is dangerous for another. I will be moving to CA soon, and my partner is in Napa. Let’s get together when I’m in the Bay Area and network!

  3. Jerry W.

    David,
    Thank you for the article, it was excellent. I like your writing style and your common sense approach. My local economy is going into a bit of a recession right now due to the drop in oil prices. We will see how it goes. When Wyoming goes into a recession it does not do it like the rest of the country.

    • David Greene

      If your properties cash flow, it really doesn’t matter what they are worth. Recessions tend to lower the value of the house, but the rents don’t move much. If you are cash flowing, it doesn’t matter what the house is worth. Why I love real estate!

  4. Curt Smith

    This reminds me that national gurus may have run out of gas, nothing to offer folks in May 2016. Think of it, he’s a one book wonder, a very expensive coaching service with what kind of reviews? LOL 5 Gs. Wow great! 🙂

    Here’s my tip from my doing this daily landlording business in GA. This will work every where. Buy the cheapest houses in the best school districts. 8 out of 10 great schools or better. You will never have an empty rental, rarely need to evict, families who want a rental in good schools are reasonable and dependable families who pay and don;t damage. This is from first hand experience. Don’t over pay though!!

    If your city is too expensive and cap rate is below 10%, my cut off for SFR rentals, move out the major freeways to 45 minutes away from jobs small towns. Pick the best side of town, still good schools 6 out of 10, but 3/2’s with light rehab. To keep your all in down so the cap rate stays decent. Even in down markets good schools and driving distance to jobs will keep your rentals full.

  5. Chris Lopez

    Beyond his basic financial messages in “Rich Dad, Poor Dad” and “Cashflow Quadrant”, I’d take Kiyosaki’s advice with a grain of salt. I forget how many times he’s given advice for investments for upcoming recessions that have been horrible. If you’re going to take his advice and invest in the 5 G’s, do an analysis on his track record from past recommendations. You would have been better of investing in good RE deals and low cost S&P 500 index funds.

    As Jared pointed out, Robert makes a ton of money off of seminars and expensive education packages. I’ve a had a few friends buy (against my advice) stock and RE packages for $10,000 to $20,000. It was all a waste of money. Their money used as a downpayment or in an index fund, would have put them way better off.

    I have a friend who was a top executive at a company that paid Kiyosaki a six-figure speaking fee to appear as a keynote speaker. He did a great job on the stage, but everyone behind the scenes agreed they would never hire him again for many reasons off stage.

    • I agree that Robery Kiyosaki is not to be trusted. He makes his money licensing his name at this point. He does NOT even own the name “Rich Dad, Poor Dad” (RD, PD). That is not him. RD, PD is controlled by an organization that often changes it name / entity status due to lawsuits. It has been known as “Rich Dad Education”, “Tigrent Learning”, etc. They are dishonest, and once they have their claws into you, they will bleed your wallet dry. The Florida Attorney General has an ongoing investigation into their shady business practices. They an “F” grade from the BBB, http://www.bbb.org/stlouis/migration/bbb-warnings/2011/05/bbb-urges-consumers-to-approach-tigrent-rich-dad-education-seminars-with-caution/
      Robert Kiyosaki has no say whatsoever as to what RD, PD does. However, he does make a boat load of money from their dealings. It’s sad really…

  6. Paul Miller

    Thanks, David for the excellent article! I operate a small farm in addition to having a few single family rental properties, I like the idea of merging the two, or stacking the two enterprises. For example, on the edge of urban centers, properties may be available with multiple 2/1’s or a 2/1 and a 3/2 as well as ground for some sort of agricultural production. Proximity to urban centers is key as it provides a market for the rental property as well as the food production. I wonder if Kiyosaki was going this direction? In my area there are interesting opportunities whereby the agricultural production covers the mortgage (and more), the rents provide straight cash flow and the land has more division rights for additional RE development. Food for thought…

  7. Craig C.

    Excellent article! More people need to be slamming these Delta-Alpha’s who speak jibberish (IE Robert Kiyosaki and others like him)! Even an empty can will rattle.

    The 5 G’s: I agree with 4 out of the 5. GOLD? Not so much. When we had a civil war in the 1860’s, confederate dollars didn’t retain value as tender, but Gold wasn’t used as currency from there forward. Paper money was replaced with another form of paper money, and this will continue to be the case as Gold hasn’t been used as regular tender since the Roman Empire.

    Gold is a decent hedge at best, over the last 50 years, precious metals (when adjusted for inflation) have only really gained about 2 or 3%,

  8. Rick Mills

    Outstanding read! Very concise with valuable information. However, I do agree with Craig C. regarding the 5 ‘Gs. Ground, Guns, Grub and Gasoline are right on but Gold is very overrated unless you are extremely well studied in commodities or just plain lucky. Thank you for the article David.

  9. Jonathan Godes

    I think we saw during the last recession that “ground” did not go up in value like Mr. Kiyosaki advocates. Our government did print money, but strangely it did not devalue our currency and create higher than normal inflation.

    What I think folks are missing is that the US economy is almost a “6th G.” People flock to safe investments in times of turmoil (like gold), and the US economy has proven that as well. This flight to safety in US Treasuries from foreign investors kept us fighting deflation if anything (we have been below the Fed’s target inflation rate for almost a decade now).

    The last several recessions did not play out as Mr. Kiyosaki claims, with ground (rent and price) going up considerably. It only went up as the correlated economy recovered. Because wages have not gone up along with home prices, more expensive real estate just means that people are not moving up, or out of their parent’s basement.

    While guns might have gone up in Africa during a revolution, ammunition did not go up in the US during any recent recession. Nor food (any more than normal), nor gas. So while this “economic theory” sounds like wisdom, for the US investor (99% of BP’s audience) this is completely worthless advice on almost every level. If you live and invest in South Sudan… maybe this applies to you.

  10. Deanna Opgenort

    Buy ground before a recession?
    Let’s think — last recession…how smart was it to buy it BEFORE the recession? Hullo — way to lose your shirt, right? DURING the recession, heck yeah (but that’s kind of a “Duh!” statement, right?).

  11. Casey Murray

    Just leaving a comment so I can read subsequent comments. Great feedback thus far. This article reminds me of one of the many investment rules from Warren Buffet; sell when others buy and buy when others sell. Great article, David.

  12. Marcia Maynard

    He’s right about Ground and Grub. During the Great Depression my mother was growing up on a Dairy Farm in southern Wisconsin. People fled the big cities looking for work. She told me they took on a lot of hired hands who worked hard in exchange for a place to live, food to eat and a little pocket money. My mother’s family never felt the depth of despair others did during that time. With a place to live and the ability to be self-sufficient, they did quite well.

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