08 Dec Good Debt vs Bad Debt
Have you ever heard the term, Good Debt? You’re probably thinking there is no such thing as good debt?
What if I told you that it’s possible to make money by being in debt and that you cant get paid every month by being in debt, you’re probably thinking that’s not possible, well I can tell you it is and the way to do it called Real Estate.
So before we get into that, the word ‘debt’ typically has a negative connotation to it, when we hear the word ‘debt’ we typically think about credit cards, personal loans or car loans, in most cases these are classed as ‘bad debts’.
Now, here’s the part where we talk about good debt. I’m going to tell you exactly how you can use debt to make you money, it’s easier than you think.
Here’s a basic example, let’s say you need a twenty percent down-payment to purchase an investment property and the bank will loan you the remaining eighty percent. Let’s say you purchase an investment property for two hundred and fifty thousand, you’ll need a down payment of fifty thousand and the bank will loan you the rest, two hundred thousand, so essentially you now have a debt of two hundred thousand.
Now if the monthly cost of this debt is said nine hundred a month, and the property tax is say two hundred a month and insurance one hundred a month, then your total monthly cost is twelve hundred.
If you rent that same property for say fifteen hundred a month, it is now paying you three hundred dollars a month.
It’s that simple. This is a basic example of how a two hundred-thousand-dollar debt can pay YOU every month.
This is the difference between Good Debt & Bad Debt, bad debt costs you money and good debt makes you money!