Wed, 27 June 2018
#146: Debt is good. Debt is bad. Which type is good and which type is bad?
When your tenant is paying your debt for you, that’s good debt. When you have consumer debt, that’s usually bad. But Keith contends that consumer debt can almost be good for some savvy investors that use debt for arbitrage.
If you could have gotten a 3% loan on your car, but instead you chose to pay cash, then you’re probably paying an opportunity cost.
In real estate, the return from equity is always zero. Debt replaces that zero-return equity. But would you ever pay all-cash for your property? Keith is a “leverage guy”, but yet he gives reasons for when and why you would want to pay all-cash.
Would you borrow $100K from 0% APR credit cards to create arbitrage? Some do.
Mortgages, Home Equity Lines Of Credit, Federal Funds Rates, automobile loans, student loans, and credit card debt are all discussed.
Ultimately, you would rather be financially-free rather than debt-free.
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Listen to this week’s show and learn:
01:25 “Eliminate all debt” is just too simple to be true.
04:31 Why pay down mortgage principal at all?
05:50 A mortgage is a one-way street. HELOCs are a two-way street.
08:06 Robert Kiyosaki clip.
11:04 Consumer debt and arbitrage.
12:30 Increasing interest rates.
13:25 Higher FICO scores and Debt-To-Income Ratio limits.
15:05 Interest rates have never been this low while the job market is at full capacity.
16:29 Credit card arbitrage.
23:15 Here’s when and why to pay all-cash for a property.
26:10 Ryan Daniel Moran clip.