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CASHFLOW Quadrant
But the main reason a house, even without a mortgage, is still a
liability is because you still don’t own it. The government still taxes you
even if you own it. Just stop paying your property taxes, and you’ll find
out who really owns your property.
That is where tax-lien certificates come from, which I wrote about
in Rich Dad Poor Dad. Tax-lien certificates are an excellent way to
receive up to 16 percent interest on your money. If homeowners don’t
pay their property taxes, the government charges them interest on the
taxes owed, at rates from 10 percent to 50 percent. Talk about being
taken to the cleaners! If you don’t pay the property taxes, and someone
like me pays them for you, then in many states, you owe me the taxes
plus the interest. If you don’t pay me within a certain amount of time,
I get to take your house just for the money I put up. In most states,
property taxes take priority in repayment, even before the bank’s
mortgage. I’ve had the opportunity to buy houses I paid the taxes on
for just a few thousand dollars.
The Definition of Real Estate
Again, to be able to see money, you must see it with your mind,
not your eyes. In order to train your mind, you must know the real
definitions of words and the system of numbers.
By now, you should know the difference between an asset and a
liability, and you should know the definition of the word “mortgage,”
which is an “agreement until death,” and the word “finance,” which
means “penalty.” You will now learn the origin of the words “real estate”
and a popular financial vehicle called “derivatives.” Many people think
derivatives are new, but in reality, they’re ages old.
A simple definition of derivative is “something that comes from
something else.” An example of a derivative is orange juice. Orange juice
is a derivative of an orange.
I used to think that real estate meant “real” or something that was
tangible. My rich dad explained to me that it really comes from the
Spanish word real, which means “royal.” El camino real means the
royal road. Real estate means the royal estate.
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