Debt is bad!

Debt is bad – I don’t want to borrow!

That’s what I heard someone say at friend's BBQ last weekend.

The conversation had turned to real estate and what's happening in the property markets are at present (as it usually does) and one of the group standing around said: “I’ve almost paid off my house - I hate the thought on taking on more debt.”

So the question begs, is all debt bad?

Fact is you can’t work or save your way to wealth.

If your money isn’t working for you when you’re asleep you’ll never become rich.

And for your money to work for you, you must leverage it - you must take on debt.

So…if you’re not in debt, chances are you’ll never become wealthy or achieve true financial freedom.

Of course not all debt is good.

As I see it there are 3 types of debt:

1. Necessary debt

This is the debt you need to take out against your home.

While the interest is not tax deductible, the debt is necessary to provide a roof over your head and the value of your home should increase over time.

2. Good debt

Good debt is ‘efficient’ as it helps you buy appreciating assets such as investment properties and the interest is tax deductible.

Even better the rental income from the investment property helps you repay the debt, and if you claim depreciation and negative gearing, the tax man and your tenant share in your mortgage repayments with you.

3. Bad debt

• Also read:6 priceless investing lessons from influential billionaires
• Also read:Redefining Richness: Why Time Matters More Than Money
• Also read:Conquer Your Monsters: Busting the Top 10 Fears Holding You Back
• Also read:Booms, busts and investor psychology – why investors need to be aware of the psychology of investing
• Also read:10 BIG Benefits of setting up an SMSF or a Family SMSF

Now this is what I consider ‘inefficient’ debt and can keep you poor forever.

Bad debt buys you assets that decrease in value over time like “toys”, fancy cars, gadgets etc. 

Worse still the interest you pay the bank is not tax deductible and repayment of the debt is from your own resources

Now don’t get me wrong…

I like my toys as much as the next person, and now I can afford them because I’ve built a substantial asset base of income producing properties.

I did this by spending less than I earned and investing the difference.

Then I saved up a deposit and took on good debt to buy my first investment property.

Then I took on more good debt to buy the next property and the next one, until I could afford the luxury of taking on bad debt to reward myself.

Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on

If you're wondering what will happen to property in 2020–2021 you are not alone.

You can trust the team at Metropole to provide you with direction, guidance and results.

In challenging times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that's what you exactly what you get from the multi award winning team at Metropole.

If you're looking at buying your next home or investment property here's 4 ways we can help you:

1. Strategic property advice. - Allow us to build a Strategic Property Plan for you and your family.  Planning is bringing the future into the present so you can do something about it now!  This will give you direction, results and more certainty. Click here to learn more
2. Buyer's agency - As Australia's most trusted buyers’ agents we've been involved in over $3Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney and Brisbane bring you years of experience and perspective - that's something money just can't buy. We'll help you find your next home or an investment grade property.  Click here to learn how we can help you.
3. Wealth Advisory - We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
4. Property Management - Our stress free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years and our properties lease 10 days faster than the market average.