1/ All these personal finance gurus are constantly talking about how debt is a massive mistake. Stay away from debt, they say. You'll regret it.
Of course, not all debt is BAD debt & since they are only ever focused on buying companies, they don't understand GOOD debt at all.
Of course, not all debt is BAD debt & since they are only ever focused on buying companies, they don't understand GOOD debt at all.
2/ My mentor's favorite statement was NOT the rental income or property appraisal. It was the mortgage statements.
Every month he would watch his net worth rise as others paid off the interest (owed to the bank) as well as paid down his principal, thus increasing his net worth.
Every month he would watch his net worth rise as others paid off the interest (owed to the bank) as well as paid down his principal, thus increasing his net worth.
3/ He didn't need the market to move up nor was there any need to renovate or reconstruct anything. On top of all the other sources of income his properties were producing, he was getting stinking rich with 100s of tenants paying off his debt.
That's why we call it GOOD.
That's why we call it GOOD.
4/ What were the other sources of income & wealth generation real estate produced him?
• if the property market moved up, his properties would be worth more
• if he rehabbed his properties, he would "force appreciate" them higher, even if the market didn't move up
• if the property market moved up, his properties would be worth more
• if he rehabbed his properties, he would "force appreciate" them higher, even if the market didn't move up
5/ • his rental income was taking care of his P+I (principal & interest) plus it was positively cash flowing (monthly)
• because a property has the greatest tax advantages, he was able to write off (some) personal expenses against his asset income
• because a property has the greatest tax advantages, he was able to write off (some) personal expenses against his asset income
6/ • in some countries (e.g. USA) one should NEVER pay taxes on capital gains on the property thanks to 1031 exchange
• in other countries, investors can even write off mortgage interest as an expense & in special cases (like AU) write off rental losses against personal income
• in other countries, investors can even write off mortgage interest as an expense & in special cases (like AU) write off rental losses against personal income
7/ • finally after years & years of tenants, repaying his principal down month by month, he would have a lot of equity which he could withdraw (in cash or down payment)... and the best part is this cash withdrawal cannot be taxed because you cannot tax debt (only income & gains)
