Use Debt To Create Wealth in 3 Simple Steps

by | May 7, 2021

Most of us were raised with the idea that debt is bad. Debt drags you down. Rich people are never in debt.

While that may have been true for our great grandparents, it’s no longer the case. Debt is one of the keys that can unlock future wealth as a property investor. The more good debt you have, the more income you can create. 

But, before you go out and put yourself $1 million in the hole, let’s talk about the right kinds of debt. The debt that’s going to lead to success, not ruin. This is called…

 

…DEBT LENDING

With real estate you can use your assets to create wealth. In simple terms, you can pull money out of one property in order to buy another. Equally borrowing money from a bank or other financial lender and using that cash to buy a property that is going to give you an income and increase in value over time, is a smart way to use debt to create wealth.

With record-low interest rates up for grabs, now is a great time to borrow money. Cash is cheap, which means borrowing and investing is more accessible to more people. The opportunity to create wealth as investors is in great shape.

But, even with low interest-rates, the banks aren’t just throwing cash around and there are steps you need to take to ensure you can borrow at your maximum amount and then leverage that cash to start building a portfolio.

 

STEP 1: CLEAN UP YOUR FINANCES

For at least three months before you want to borrow money that you can then use as a deposit, get your finances in shape. That means:

  • getting rid of direct debits i.e. any ongoing drain on your finances and;
  • cutting out any unnecessary spending

Your ability to borrow, and how much, will depend on how clean your accounts and budget look. Come up with a strategy to reduce your outgoings and get your accounts looking healthy.

 

STEP 2: THINK ABOUT HOW TO LEVERAGE YOUR LOAN

The point of borrowing for property investment is not about reducing your loan amount as quickly as possible. Let go of the idea that your debt is hurting you, when it’s actually your best friend. 

Consider this. You have $100,000. Do you spend it all on one deposit, or take that cash and split it into two deposit amounts, and buy two properties? Can you leverage your debt to work harder for you and start to create cash flow faster?

If you can divide your deposit into smaller amounts and purchase more properties, your debt will start to create cash flow that much quicker.

 

STEP 3: GET THE RIGHT LOAN – AND DO YOUR NUMBERS

The difference between an interest-only loan and a principal interest loan is important when we’re trying to make debt work for us, not against us.

The key here is to read the terms, especially when it comes to interest-only loans. While they can be the smartest way to leverage your deposit to it’s maximum, you need to be aware of how your finances will need to adjust when the fixed term comes to an end. 

Part of making debt your friend, not your enemy, is by respecting it and getting to grips with the terms and conditions attached. A smart property investor knows the cost of their interest and how that might affect their debt moving forward. In short – read the small print and pay attention. It’ll pay off. 

 

DEAREST DEBT…

By now you’re probably aware that good debt can serve as a faithful friend on your journey to create real and lasting wealth. 

The real key though, is ensuring you’re maximising your debt potential with a strong property investment plan that will set you up for long term financial success. To do this there are a lot of moving parts which is why we’re currently running a free property investment seminar

Sign up to this extremely valuable event and learn the most crucial elements you need to be across to make sure your debt is working for you not against you. 

This is a great opportunity to be equipped with the tools, resources and support to thrive, and not fall behind on your path to financial freedom – whatever that may look like for you. 

Limited spaces are available. Book here now

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Turning $80k into $800k

Turning $80k into $800k

Welcome to the first episode of Property Investor Tales – Stories From The Front Yard!

Each week I get to speak to property investors from around Australia about their investing journeys. As the head of coaching at Positive Real Estate, I’ve been fortunate to connect with thousands of investors who have a story to tell. My hope is that from these incredible investors, your own investing journey is made that little bit easier. 

Abe Pasilidis is my guest today and he has an inspiring story to tell. I won’t give too much away but listen out for an $80k investment has turned into $800k, plus a hilarious story of property management gone wrong (when you DIY). 

Enjoy this conversation with Abe!

Once you’ve listened to this episode, I’d love it you hit the subscribe button  so you get notified every time a new episode drops. 

As you can guess I love hearing people’s property investor tales so if you’d like to share yours then please get in touch with me via email at  propertyinvestortales@positivementor.com.au You can watch all of these podcasts over on YouTube at Positive Mentor or at positivementor.com.au
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Today, I am talking about some key lessons I learned from Dr. Andrew Wilson, a housing economist and a funny bloke. He is a member of the Chartered Surveyors Community, a wealth of knowledge, and a voice of reason when it comes to real estate investment. I’ve adapted his predictions into my strategies and share them with you today!

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