Negotiator Finance - http://www.negotiator.com.au
Fear of Debt
http://www.negotiator.com.au/articles/4/1/Fear-of-Debt/Page1.html
Gregg Mountford
 
By Gregg Mountford
Published on 02/19/2007
 

Most people focus on the total debt rather than how much it costs you to service that debt after all expenses are paid by the tenant, taxman and of course your own contribution, which is usually minimal in comparison.....


Fear of Debt
The biggest obstacle to investing in real estate is getting your head around borrowing large amounts of money from banks. This is because most people focus on the total debt which could be millions of dollars rather than how much it costs you to service that debt after all expenses are paid by the tenant, taxman and of course your own contribution, which is usually minimal in comparison. This is one of the most effective strategies I have learnt and then applied with real life results.

My greatest fear was actually doing nothing, getting to retirement age and just existing on a government pension, if it exists at all in the future when I retire. This took me on a journey, educating myself on the best investment strategy that was simple and easy to understand which suited my psychology and personality.

The only debt to fear is bad debt - what do I mean by bad debt? Bad debt is borrowing money for a liability such as a car, boat, jetskis, new furniture etc because as soon as these products exit the store, you've lost hundreds or thousands of dollars. Not only do you lose money on these items, you are paying interest on borrowed funds which is a double whammy.

The key to good debt is borrowing money to put into an asset such as real estate which will make you money with the least amount of effort. Investing should be enjoyable and what I've learnt over the years is to work smarter, not harder.