How to Borrow Your Way to Riches
Why does one real estate investor become a millionaire and another stay broke and in debt? Why does one investor always have the money to make the deals and another always seems to tread water? Why does one constantly push up while another just pushes on, or worse, just gives up?
No doubt some investors have tapped into the best kept secret that will help you achieve the unlimited success and wealth you have always deserved. It’s the secret that helped Donald Trump, Robert Kiyosaki and Ross Perot build their real estate empires.
What is this secret?
Your wealth is limited only by your ability to borrow money. Yes, your ability to get into debt determines your ability to achieve wealth.
But debt is a complex concept. It’s not all good, a fact a surprising number of people don’t realize until they’re in the hole, and yet not all debt is bad. When used wisely, the right type of debt can go a long way in building your wealth.
Smart investors know the difference between good debt (investment debt) and bad debt (consumer debt). When you buy something that immediately loses value, that’s bad debt. Buying a car with debt seems like an inescapable part of life, but the car has no potential to increase in value and that’s bad consumer debt.
By contrast, good debt is investment debt that creates value. For example, you find a nice piece of property that needs to be fixed up so you can resell it at a profit. You get a short-term loan from a private lender to buy the ugly house and fix it up fast. This is definitely a good debt.
Why?
Several months later, you sell the house, pay off the private lender’s loan, and leave the title company with a five-figure check representing your profit. Without a doubt, the best type of debt is debt that builds wealth over the long term, and example number 1 is debt for the purchase of real estate.
Imagine selling only two houses each month. And every time you sell the house, your loan from your private lender is paid off immediately and you walk away with a generous check.
This may sound like a fantasy to you, but successful real estate investors routinely use investment debt to achieve their financial goals. These same investors often buy their properties with no money down. No down payment does not mean that there is no money involved in the transaction. The goal is not to use your own cash, and that’s exactly what experienced investors do with short-term investment debt.
Most new investors believe that their lack of money is what prevents them from making a deal. Although this is not true, it prevents some investors from starting their business and reaching their goals.
Don’t let your lack of money, bad credit, or lack of credit stop you from building your real estate fortune. Sure, it takes more than money. Being successful as an investor also takes time and effort. But you have to provide the time and effort when you’re just starting out. But what about the money to make the deals? Well, it doesn’t have to be yours.
I have bought over 200 properties in 4 years. I not only borrowed money from private lenders to buy the properties, I also borrowed the money to rehab the houses. My consistent use of short-term investment debt has helped me out of long-term financial slavery.
So how do you find private lenders?
Start by reviewing your current relationships. Do you know a real estate agent? Some real estate agents who specialize in foreclosures can be excellent sources regarding private lenders. How about someone who works at a title company? If he has already purchased a home, he can contact the escrow officer who helped him with the closing on his home. Here are some more possibilities.
■ Lawyers
■ CPAs
■ Insurance agents
■ Local Association of Real Estate Investors
Once you get a referral from one of your valued connections, you’ll meet with the private lender to discuss your real estate investment plan. Repeat the process with multiple private lenders and your investment business will appear to be on steroids. You will quickly be on your way to wealth.
Real estate investors cannot achieve real wealth without going into debt. And despite what you may have learned growing up or in school about never going into debt, the more short-term investment debt you incur when buying real estate, the more value you’ll create—and the faster you’ll build wealth.
In fact, you can borrow your way to riches.