"Rich Dad, Poor Dad" Chapter 5 Math Check

[Mark Carbonaro]

In reading "Rich Dad, Poor Dad", I'm trying to understand how Mr. Kiyosaki's numbers work out the way they do in Chapter 5. Specifically, he gives the example of his first flip where he profited $40,000 from 5 hours of work. His math and the corresponding chart do not make sense to me.

He says the transaction went as follows:

"For $2,000, which was loaned to me from a friend for 90 days for $200, I gave an attorney a cashier's check as a down payment....I asked for a $2,500 processing fee, which [the buyer] gladly handed over...I returned the $2,000 to my friend with an additional $200...I had sold a house for $60,000 that cost me $20,000. The $40,000 was created...in the form of a promissory note from the buyer."

Robert's corresponding chart shows the following:

My confusion lies in that if he sold the house for $60,000, shouldn't the promissory note be worth the price of the sale (i.e. $60,000), not $40,000? Or perhaps if he forgot to mention that the buyer paid $20,000 down and then gave him a $40,000 promissory note, shouldn't the $20,000 mortgage have been paid off/ removed from the liabilities list?

The balance sheet shows a net profit of ($40,000 - $20,000) $20,000, but I infer from the passage that the $40,000 promissory note was profit since "the house sold for $60,000" and "[the house] cost...$20,000." If the buyer only gave him a $40,000 promissory note and he still had a $20,000 mortgage (as made evident by the balance sheet), he would have made $20,000 after paying off the mortgage- not $40,000. Basically, $40,000 + (-$20,000) = $20,000, not "the created" $40,000.

If anyone could explain what I'm missing, I would greatly appreciate it. Thanks!