Why does one real estate investor become a millionaire while another is left broke and in debt? Why does one investor always have the money to make the deals and another seemingly always treads water? Why does one constantly push upwards while another just pushes ahead, or worse, just gives up?
Certainly, some investors have tapped into the best kept secret that will help you achieve the unlimited success and wealth you’ve 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 take on debt determines your ability to achieve wealth.
But debt is a complex concept. It’s not all good, a fact that 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 kind 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 to be 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 for a profit. You get a short-term loan from a private lender to buy the ugly house and fix it up quickly. This is definitely a good debt.
Why?
Several months later, he sells the house, pays off the loan from the private lender, and leaves the title company with a five-figure check representing his profit. Without a doubt, the best type of debt is debt that builds long-term wealth, and the number 1 example 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 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 down payment. No down payment does not mean there is no money involved in the transaction. The goal is not to use your own cash and that is precisely what experienced investors achieve 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 achieving their goals.
Don’t let your lack of money, bad credit, or lack of credit keep 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 must provide the time and effort when you are just starting out. But what about the money to make the deals? Well, it doesn’t have to be yours.
I have bought more than 200 properties in 4 years. I not only borrowed the 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 break out of long-term financial slavery.
So how do you find private lenders?
Start by reviewing your current relationships. Do you know any 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 bought a home, he can contact the escrow officer who helped him with the closing on his home. Here are some more possibilities.
■ Lawyers
■CPA
■ 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 riches.
Real estate investors cannot achieve real wealth without taking on 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 create wealth.
In fact, you can borrow your way to riches.