Use Debt To Create Wealth in 3 Simple Steps
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…
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.
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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Welcome to the BEST of ‘21 series on the podcast! This is week 3 of my four week holiday – and I can’t wait to bring to you my predictions for 2022 in the coming weeks. For now, here’s one of the most downloaded episodes of 2021.
Only 1% of people really succeed with real estate investing. So why do 99% of people fail – and what do you need to do to ensure you’re not one of them? If you own real estate already, today’s show just might burst your bubble. We explore property management and reveal what type of buyer you actually are. Nobody really wants to own anything, because when you own something you have to be accountable for it. So in this episode, we will talk about how to navigate the property owning journey. Because often the conversation in real estate is centered around buying and selling. But what about the big part in the middle? Welcome to Episode 78 of the Urban Property Investor!
Laura Chugg first started paying rent from the age of 16. Ever since then – out of necessity to begin with – she’s been magnificently obsessed with managing money smartly. From the early days of earning $5.88 per hour to now coaching and helping people invest in real estate, Laura has seen a wave of change and growth. With investment properties in her portfolio that have quadrupled in value (buy well never sell), and a raft of lessons learnt along the way, Laura shared with us some of her most powerful Property Investor Tales.
Welcome to the Best of 2021 – Urban Property Investor style! Today’s episode – the Secret Language of Real Estate – was the SECOND most listened to episode in 2021, and it’s a doozy!
There is a secret language to real estate that most investors do not know. Knowing that most real estate is not worth touching, how do you then listen to the “secret language” of properties that are desirable. This episode explains this secret language so that you buy desirable real estate that will not only provide quality housing to people, but help you crack the code of real estate. Enjoy!
Rose Pengilly had done a lot of real estate investing before getting professional coaching with Positive Real Estate. In her own words, Rose felt like “a bit of a mess” with “no real plan”. “I was just doing my own research and I didn’t have any professional coaching.”
Rose shares the challenges of a messy portfolio, and also the challenges of cleaning that portfolio up. After purchasing three pieces of real estate in Brisbane, Sydney and Melbourne, Rose shares the anxiety and lessons from her experiences.
This is an incredibly honest and real conversation from a successful property investor, and one that anyone – beginning, intermediate or advanced investor – will be able to relate to in one way shape or form.
Welcome to the BEST OF ‘21 series for the Urban Property Investor!
Episode 33 was THE MOST DOWNLOADED Episode of 2021 by far. You voted with your earbuds! So if you’re new here, this is the one that everyone wants … and if you’ve already listened – then I reckon you’ll pick up some more nuggets the second time around.
Here’s what I said at the time –
Do you want to beat the banks at their own game? In this episode, I want to show you how to master financing your property portfolio. Yes, finance is the key to capital, and the more you can borrow sensibly, the faster you get to crack the code of real estate wealth.
Carolyn Weston has always desperately wanted to invest in real estate. Growing up in a modest family, she didn’t believe that hard work would necessarily be enough to create wealth. In her marriage, she was constantly rebuked for wanting to invest. After separating, her low income, marital status, and two young children made it extremely difficult to get a loan. But that didn’t stop her.
Not only did Carolyn make some incredibly tough decisions in order to enter the investment market, she has stuck to the task for over 10 years to the point where she is now one of our coaches at Positive Real Estate. A single mum who couldn’t afford becoming a client of PRE to begin with, to now being one of our team and a mentor and coach to so many Australians who enjoy the riches of Carolyn’s experience.
This is the last show of 2021, and what a year it has been. We had lockdowns, vaccinations, hysteria, and massive changes in the real estate market. And now we are left in a pretty bizarre place as real estate investors as we go into 2022. So what can we expect from the upcoming year? That’s why we are dedicating the final episode of the year to 2022 predictions.
Melissa Cowan is 31 with two investment properties. After buying her first IP off the plan, she very quickly purchased her second. How did she do it? It’s a great story of risk management and understanding your threshold for stress. So many of my previous guests have said “I wish I started investing earlier” – well here is that investor – and what a great story it is.
Once you’ve listened to this episode, I’d love it if you hit the subscribe button so you get notified every time a new episode drops.
This is the Christmas edition of the Urban Property Investor. Is your portfolio set up to handle market kryptonite? On this episode, I discuss 13 ways to get more cashflow. From spatial transformation to hotelification, this episode will get your imagination buzzing over the Christmas period. This is one of the best lessons I can possibly teach you, so I am giving it to you as a Christmas gift, whilst I’m swimming with turtles on Lord Howe Island.
Dani & Craig Skinner have an incredible life and investing story to tell. Dani was born in Ghana and grew up in Zimbabwe, and met Tahree-born Craig in Newcastle before they courted in Sydney, got married, and moved to Brisbane.
Before I knew of Dani and Craig, they had already purchased four investment properties. But they weren’t happy with their portfolio, which was a mix of older real estate in low performing areas. But having the wrong type of real estate didn’t stop Dani and Craig from keeping their eyes on the prize. Having felt like the bank “owned” them, Dani and Craig transformed their portfolio into higher performing assets and now have a sensational range of assets that is helping achieve their family, financial and lifestyle goals.
You can’t help but be inspired by this power team. Enjoy!