Get a Powerful Passive Income Strategy

Kiyosaki's work Rich Dad, Poor Dad has given people the impression that it's all to do with investing in property to get freedom from money worries by reaping rental or resale income. So, when people think of earning a passive income they look to the real estate market.

To put something straight: That's not what the book says. I listen to these people with patience (real estate is undoubtedly part of an effective investment strategy), but financial freedom isn't won with just one magic bullet but with a well-realized plan.

Writers like Robert Kiyosaki, Robert Allen, David Bach and many others make it clear that you must have multiple passive income streams and that doesn't mean putting all your eggs in one real estate basket. You need many investments vehicles each delivering passive income.

In its simplest terms, passive income is money that comes in day after day without you expending too much effort. It's a way of earning without trading in your time. The best passive income operation could be left for a year and still be producing the same - or even higher - returns when you return to it. If you want financial freedom then a passive income vehicle is the best way to go.

So what does Kiyosaki really talk about in Rich Dad? His principle is Power Investing.

This means:

1. Start a business in your part time to generate cash flow and advantages in your tax affairs.
2. At the right time (and now is not one of those times) put money into real estate.
3. Use the excess generated by your real estate investments to buy paper assets.

Sadly, many investors only see point two and believe that's the secret to passive income whatever their level of expertise in the field is.

To qualify as a passive income business you need that property to be earning you cash not costing you money. Capital gains is a different thing entirely; the belief that your property will increase in value so you can sell at a profit, this shouldn't be your aim in achieving passive income from property.

Your first step in your passive income scheme should be research. Take a look at businesses, paper assets and real estate and plan to include a variety of these. The more diversified you are, the more stable your income is likely to be.

So, to return to power investing principles, let's start with number 1: Building a business. Why start here? Well, a business will bring in the cash flow to back your real estate investments.

Although Kiyosaki only outlines three steps in his principles it's important to understand the reasons for each step. Make yourself a master of business first before you start investigating investing in real estate.

Taking it step by step will lead to prosperity and reduce your risks along the way.