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There are good debts and bad debts. If you use loans to pay a property which earns you $10,000/month whereas your monthly payment to the bank is only $8,000/mon
by zhoutong 15y ago
There are good debts and bad debts. If you use loans to pay a property which earns you $10,000/month whereas your monthly payment to the bank is only $8,000/month, why bother using cash to pay for the property?
You can leverage your cash well and scale the business to many properties and the total down payments you pay might be even less than the price of ONE property.
Good debts are those debts with higher returns elsewhere than the interest of the debts themselves. Using credit instead of cash here is simply free cash-flow.
- mgkimsal 15y agoWhen that property stops earning you $10,000/month, you'll be in a heap of trouble pretty fast if you can't keep making those $8,000/month payments.
- zhoutong 15y agoWhen this really happens, selling the property is a wise choice, and you can make a lot more at this point. Even if the property market crashes, you can always choose to default. - Nothing lose, this is not your own house.
- ksolanki 15y ago"Even if the property market crashes, you can always choose to default." There is always someone who loses here (investors who have put money in mortgage backed securities?). Intentionally defaulting is not the most ethical thing one could do, and this kind of thinking has partly helped bring the recession upon us, which no-one could escape. No?