In many cultures and countries, society perceives people who are in debt negatively. Is this justified? Is being in debt really bad? It certainly can be a bad thing, if for example, somebody is so much in debt that he cannot meet his payment obligations anymore.
But debt can be good, too! Many years ago Robert Kiyosaki wrote about good debts and bad debts in his book Rich Dad, Poor Dad, which is still a popular read that I also can recommend. So, when are debts good and when are they bad?
Debts are good when they help you to make more money! You can leverage on other people’s money to pay for your investment. As long as the return from your property is higher than the price you pay for the debts you have against it, it means that you have successfully used debt as an enabler to increase your financial position and wealth. Paying 3% for something that helps you to generate 6% is surely a good thing.
Debts are bad when you either can’t pay them back any more, or if they don’t help you to make money. If you take a loan on a car or a luxury item, this is considered as bad debt as these items do not help you to generate any returns. Paying 6% for something that generates no returns is not good at all.
Sources Of Finance
The belief that one needs to have a lot of money to buy a property is really only a misconception. There are ways how you can finance your property and which sources of funds you can tap on, even if you do not have a lot of own capital available. Knowing these facts will prove to be invaluable to you!
You might have heard about or seen advertised some so called “No-Money-Down” deals and potentially might have been skeptical about them. Of course it is not realistic to expect that you can obtain ownership of a property without paying the seller a single cent. There are many options though that can help us in terms of timing as well as sourcing funds that will enable you to in fact buy your property without much own capital. The seller will expect money, but it doesn’t necessarily have to come from you! It just has to come from somewhere.
What are ways to help you finance your property? Some examples include:
- Mortgages/Bank loans
- Equity Release
- Bridge Financing
- Other People
- Creative Financing
The more creatively you think, the more additional options you will find that you can tap upon. Remember to think like an investor and don’t be shy to ask for money if you have found a deal that you are sure is the right property for you. As long as you create win-win situations, people and institutions will be happy to cooperate with you.
The Property Apprentice Master, Jochen Siepmann, wants to share the wealth of his knowledge easily and effortlessly with you for FREE. Start your journey now to greater wealth through passive real estate income and capital appreciation with one, or all, of these FREE offers: