146: Using Debt For Investment
Get Rich Education
Keith Weinhold
4.3 • 602 Ratings
🗓️ 27 June 2018
⏱️ 34 minutes
🧾️ Download transcript
Summary
#146: Debt is good. Debt is bad. Which type is good and which type is bad?
When your tenant is paying your debt for you, that's good debt. When you have consumer debt, that's usually bad. But Keith contends that consumer debt can almost be good for some savvy investors that use debt for arbitrage.
If you could have gotten a 3% loan on your car, but instead you chose to pay cash, then you're probably paying an opportunity cost.
In real estate, the return from equity is always zero. Debt replaces that zero-return equity. But would you ever pay all-cash for your property? Keith is a "leverage guy", but yet he gives reasons for when and why you would want to pay all-cash.
Would you borrow $100K from 0% APR credit cards to create arbitrage? Some do.
Mortgages, Home Equity Lines Of Credit, Federal Funds Rates, automobile loans, student loans, and credit card debt are all discussed.
Ultimately, you would rather be financially-free rather than debt-free.
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Listen to this week's show and learn:
01:25 "Eliminate all debt" is just too simple to be true.
04:31 Why pay down mortgage principal at all?
05:50 A mortgage is a one-way street. HELOCs are a two-way street.
08:06 Robert Kiyosaki clip.
11:04 Consumer debt and arbitrage.
12:30 Increasing interest rates.
13:25 Higher FICO scores and Debt-To-Income Ratio limits.
15:05 Interest rates have never been this low while the job market is at full capacity.
16:29 Credit card arbitrage.
23:15 Here's when and why to pay all-cash for a property.
26:10 Ryan Daniel Moran clip.
Resources Mentioned:
Consumers May Get Credit Score Boost
DTI Change From 45% To 50% Maximum
Transcript
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| 0:00.0 | Get Rich Education is brought to you by Norata Real Estate and GRE Turnkey.com. |
| 0:10.0 | Welcome to Get Rich Education with Keith Weinhold, giving you information and ideas on the investment that has turned more ordinary people into millionaires and billionaires than |
| 0:22.1 | anything else and can provide you with more wealth and happiness than you ever thought possible. |
| 0:28.4 | Now, here's your host, investor, entrepreneur, business owner, and educator Keith Weinhold. |
| 0:39.4 | Hey, welcome to GRE, GetRits Education episode 146. |
| 0:43.6 | Hi, I'm your host Keith Weinhold, and today we're talking about using debt for investment, |
| 0:48.0 | both for investing in real estate and other debt types too. |
| 0:52.1 | My friend Dave Zook has a great quote out there. |
| 0:54.5 | You might have seen it. |
| 0:55.4 | Dave simply says you can be conventional or you can be wealthy. |
| 1:00.1 | And I think there's a lot to be said for that approach with debt as well because |
| 1:03.8 | conventional wisdom is to not have any debt. |
| 1:07.7 | Some might even say all debt is bad and to pay it down and pay it off as soon as you |
| 1:12.5 | can, even if you have to sacrifice your lifestyle to do it and not travel anywhere and eat top |
| 1:17.3 | ramen noodles in order to do it. Well, at GRE, we're not about the conventional and we are |
| 1:23.1 | about wealth creation. If one's take on debt is to simply eliminate it, gosh, that is just too simple. |
| 1:31.9 | And in fact, I've given loads of episodes on this show about how being debt-free can |
| 1:36.9 | actually get in your way of becoming financially free. Okay, so let's say that you're a real |
| 1:42.1 | estate investor, as you probably are, and if you aren't, |
| 1:44.8 | you're trying. Let's say that you have all your properties paid off, no mortgages, and you're |
| 1:50.9 | still working at a job that you're really not passionate about. Well, I'd like to ask you, |
| 1:56.1 | as a real estate investor that's in a zero leverage, 100% paid off position, this question. How would you like |
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