[Podcast] Believe it or not, debt can be an asset | 6 reasons property investors don’t become rich + More

[Podcast] Believe it or not, debt can be an asset | 6 reasons property investors don’t become rich + More

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We are experiencing extraordinary times with a booming economy and surging property market yet if history repeats itself, most investors won’t become rich.

So, in today’s podcast, I want to share three lessons with you to help even the odds in your favour. My Podcast #263 Debt

Firstly, I’m going to explain six reasons many property investors don’t become rich, and they’re probably not the ones that you would’ve thought of.

I would then like to discuss a controversial topic with you - that debt can actually be an asset, not a liability.

Of course, not everyone agrees with me, but I hope once you’ve heard my point of view you will understand why the rich are getting richer because they know how to use it wisely, especially in today’s low-interest-rate environment.

And then I’m going to share 5 things that you can do differently to make your future better.

The reasons why property investors don’t become rich

Reason 1 – Most people wait too long to start

Many investors are waiting for everything to be “perfect” before they get going.

Which means they never get going.

The longer you wait to get started with your investing, the longer it will be before you get the money, success, and freedom you want.

Reason 2 – Fear stops them

Fear keeps many of us from getting what we want, especially in matters of money.

Some fear taking on more debt, others fear failure and some even have a fear of success.

Successful investors have learned to harness their fears and rather than focus on the negatives, they use fear to force them into positive action.

Reason 3 – Waiting until they know enough

The fear of not knowing enough prevents other investors from getting started.

However, the irony here is that the more you learn, the more you learn that you don’t know!

The way out is to recognize that while you don’t know it all, and you never will, you do know enough to get started with your investing and you will learn more along the way as you apply your knowledge in the real world, surviving any mistakes and challenges along the way.

Reason 4 – Focusing on linear income instead of passive income

Some income streams are linear, and some are passive. Wooden Puzzles With The Image Of Money Income

Linear income is what you get from a job.

Passive income is when you work once but continue to get paid over and over again from work you’re no longer doing.

The way to become wealthy is having passive income coming in whether you go to work or not.

Reason 5 – Not using systems for making money

A system for making money is something that takes the emotion out of your investment decisions and makes the results more reproducible.

My preferred system is investing in high-growth property.

Once you create a proven system for making money, there is no limit to the money you can make.

Reason 6 – Not being patient

Warren Buffet once said: “wealth is the transfer of money from the impatient to the patient.”

To become a successful property investor requires patience and persistence.

You must not only get started, but you must continue on and follow through.

How debt can be an asset

You were probably taught by your parents to get a good education, a good job, buy a home, work really hard, and pay off your debt.

But, in my mind, that’s not a productive use of the equity in your home.

Instead, you should recycle the equity in your home and convert it into productive debt to buy income-producing assets.

The three types of debt Debt

  1. Bad debt:
    This is debt against assets that depreciate in value. Bad debt generally refers to things like credit cards or other consumer debt that does little to improve your financial outcome.
  2. Necessary debt:
    This is the non-tax-deductible debt against your home, but it’s something essential that can’t really be avoided.
  3. Good debt:
    This is a tax-deductible debt against income-producing and appreciating assets. Think loans against residential investment properties business loans.

A seven step guide to debt recycling

  1. Over time you will have paid down a portion of your home mortgage with a principal and interest loan and during that time your home would have increased in value.
  2. The bank will often lend you up to 80% of the value of your home as long as you can show serviceability. Wooden Blocks With The Word Debt And A Miniature H
  3. You would take out a new investment loan using your available home equity as security and the purpose of this loan would be to use the funds as a deposit on an investment property.
  4. You could use this to invest in assets that produce both income and capital growth such as a managed fund, shares, or as the deposit against an investment property.
  5. You could even use the income generated from your investments, plus any tax advantages of a geared investment, to pay off the non-deductible debt in your home loan.
  6. Over time you will build your wealth as your investment property or share portfolio should increase in value over time and the cash flow you receive in the form of rental or dividends should also increase.
  7. At the same time you will slowly be paying down the mortgage on your home, so that when you reach your retirement years and start enjoying the longest holiday you will have in your life, you will own your own home with no debt and have an investment portfolio of properties or shares (preferably both) with a manageable level of debt.


Michael Yardney
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Some of our favorite quotes from the show: Houses Of Different Size With Different Value On Stacks Of Coins. Concept Of Property, Mortgage And Real Estate Investment.

“The more you learn, the more you learn you don’t know.” – Michael Yardney

“The difference between the current value of your home and the outstanding amount of your mortgage is your equity.” – Michael Yardney

“The quality of the results you get has a lot to do with the questions you ask yourself.” – Michael Yardney


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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.

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