Many of us have images of a classic American childhood—playing hockey in the street, dripping watermelon and popsicles, watching baseball. Perhaps they’re based in memory or perhaps television. Chances are, there’s a neighbor on the other side of a too-tall fence, his garage filled with tools that someone’s dad was asking to borrow.
And those tools, once out of the neighbor’s garage are never going to make it back there. They’ll live with the borrower who will forget that he is not the owner and who will someday pass them on to his children, none the wiser. The neighbor now has nothing, while the borrower has a garage full of tools.
It’s better to be the borrower—whether we’re talking tools or money. We can hear you screaming now, but debt is bad! And that is and isn’t true. If you treat your debt carelessly and enter into dangerous consumer debt, there’s a good chance you’ll end up in financial trouble. You don’t want to be the college kid with his first credit card and a post-breakup shopping spree at Guitar Center, of course—but there’s a difference. If you are cautious and leverage your debt responsibly, you’re well on the way to building wealth and establishing significant income through real estate.
Borrowed money (in the form of your monthly mortgage payment) is essentially covered by tenants who are living in your income property, increasing the money you’re making more rapidly. In essence you’re able to use the bank’s money and pay it back with the tenant’s money. Historically, the borrower is the one getting the bailout, the loan modification, the moratorium on foreclosures. The borrower still has access to their own money for day to day expenses, unexpected problems, and other business or investment ventures. Their income isn’t tied up only in their income property—they’ve got a diverse portfolio with multiple sources of income, their mortgage is being paid by tenants. They’ve responsibly and effectively leveraged debt.
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The Jason Hartman Team