I like to say that there are three kinds of debt: the good, the bad and the ugly! The bad and the ugly debt is where you borrowed money for consumables or depreciating assets where you can’t claim tax deductions – i.e. credit cards, personal loans and car loans. I don’t ever want you to get comfortable with that kind of debt – pay it off and get rid of it.
Then there’s the good debt. This is when you borrow money on low interest rates and you use the money to purchase assets that are appreciating in value and you can claim all the tax deductions. This is the type of debt you need to build wealth and ultimately a successful property portfolio.
There aren’t many first time investors who are comfortable taking on a $500,000 loan to purchase their first property. It can be scary as hell, that’s half a bloody million dollars! What about building a portfolio of six or more properties and taking on several million dollars in debt? Does it terrify you?
The answer is, if you are well-educated about property investing and specifically investor finance, you can sleep a lot easier knowing you have made an informed, strategic decision.
Let me tell you more about it in the video below: