Robert Kiyosaki (Author of “Rich Dad, Poor Dad”):

“Is there a real estate bubble?” That’s the question I’m asked repeatedly. When I reply honestly — “I hope so” — my questioners’ fear occasionally turns into anger. “You want the market to crash?” asked one young man incredulously, an attendee at the Learning Annex’s Real Estate Wealth Expo in Dallas, where I was a featured speaker. “Yes,” I replied. “I love market crashes.”

Booms, Busts, and Where Opportunities Occur

From Robert Kiyosaki: “In early summer of 2005, I sent a warning to the Rich Dad community that the real estate market was cooling down. After all, we know that all booms go bust eventually, and every party comes to an end.

While many readers thanked me for the words of caution, many others sent me hate mail. An angry real estate broker called me and said, “Are you trying to ruin my business?”

The angry readers should draw insight from something Warren Buffett said: “For some reason, people take their cues from price action rather than from values. What doesn’t work is when you start doing things that you don’t understand or because they worked last week for someone else.”

The sage of Omaha sums up pithily: “The dumbest reason in the world to buy a stock is because it’s going up.”

Personally, I would say, “The dumbest reason to buy anything is because the price is going up.” Yet that’s what people do when they invest. They generally don’t buy high-priced things when they shop.”

Smart Investing Amidst Real Estate Mania

Rich House, Poor House. Financial guru Robert Kiyosaki has turned bearish on the boom he helped create

“But now, in the past couple of months, the man — whose engaging financial parables have coaxed millions of ordinary under-earning boobs (including yours truly) into the real estate market — has become a major bubble-blower. On richdad.com, which contains a forum for his casual and dedicated followers (including those who pay $100 a year to join his “INSIDERS” club), he’s begun posting articles that caution against what might be called “surreal estate exuberance.” He cites the Economist at length, including the assertion that “the global housing boom is the biggest financial bubble in history.” He confesses that he’s currently dumping real estate that produces no cash flow (from rental income) and going “long on gold and oil.”

Curious about why one of the foremost real estate boosters had begun to sound like a survivalist in the Utah desert, I caught up with Kiyosaki by phone at his home on Waikiki Beach.

“Don’t get me wrong, I’m still buying real estate,” he told me, adding that he was in the process of buying seven new properties but that he wasn’t buying anything in expectation of appreciation. “I’m an investor, not a speculator. … I want it to cash flow.”

He knows that many others have not been so prudent. “I’m worried about people using their houses as ATM machines,” he says, referring to those homeowners who have refinanced their homes to buy cars, remodels or simply more real estate. “And I’m worried about all the people who are flipping properties [those who buy properties in order to immediately resell for a profit] — that’s really stupid right now.”

But didn’t his books — despite all their sound financial advice about reducing liabilities and increasing assets — probably help fuel this real estate craze?

“I think it’s so,” he concedes.

To be fair, Kiyosaki hasn’t recommended that people leverage their homes for real estate riches. One of the key tenets he hammers away at is that a home is not an asset but a liability. “A lot of people think of their homes as real estate,” he says. “I don’t play games with my home. I own two houses and I’m very attached to them, but I don’t get attached to my real estate investment. It’s just ‘Show me the money’ — if it doesn’t cash flow, then I sell it.”"