Robert Kiyosaki, the renowned author of the bestselling personal finance book Rich Dad Poor Dad, has revealed he is approximately $1.2 billion in debt. However, the 79-year-old investor remains notably unconcerned, asserting that wealthy individuals approach debt fundamentally differently than average borrowers.
Kiyosaki’s substantial debt figure, which he frequently highlights, is primarily linked to his extensive real estate portfolio. Speaking on the Get Rich Education podcast, he emphasized his long-standing study of debt since 1974, cautioning that using debt effectively requires significant education.
Understanding Kiyosaki's $1.2 Billion Debt
It's crucial to clarify that the $1.2 billion figure does not represent Kiyosaki's personal liability alone. His former wife and business partner, Kim Kiyosaki, confirmed to Vanity Fair that the debt is largely associated with a portfolio of properties co-owned with various partners. This portfolio reportedly includes around 1,500 apartment units.
Estimates by Vanity Fair suggest Kiyosaki's personal share of this corporate debt could range between $30 million and $60 million, based on his reported income. This distinction underscores his philosophy of leveraging corporate structures for asset acquisition.
The 'Good Debt' Strategy
Kiyosaki's core approach, which he champions as 'good debt,' involves borrowing against properties as their market values appreciate. This strategy allows him to access capital for further investments without the need to sell the underlying assets. He contrasts this sharply with 'bad debt,' which is used for consumption rather than generating income.
To mitigate risks, Kiyosaki reportedly places individual investments into separate limited liability companies (LLCs). As he explained to Vanity Fair, these act as 'firewalls,' isolating potential financial fallout. “If it all comes to hell, you can talk to my attorney. Firewalls that’s the way the rich play the game,” he stated.
Expert Warnings on High Leverage
While property-backed leverage is a common tactic among real estate investors, experts caution against borrowing at such an immense scale. They warn that such strategies can become precarious if property values decline or cash flows diminish.
John Poole, founder of JPTD Partners, told the New York Post, “I think there’s good debt and there’s bad debt, and then there’s $1.2 billion of debt, which you better know exactly what in the world you’re doing.” He added, “Leverage works beautifully on the way up, and if it’s not continuing on that way up, then it’s like a chainsaw financially coming down.”
Despite these warnings, Kiyosaki remains steadfast in his conviction, advocating for strategic debt utilization as a cornerstone of wealth building, a concept central to his 'Rich Dad' teachings.