Good Debt In Buying Investment Properties
If you talk to a banker, you will hear one side, if you talk to a real estate investor, you will hear another side. The point is to gather all the facts so that you can then make a wise decision concerning going into greater debt in order to have greater returns.
The old adage is true, 'You must spend money to make money', or consider this one, 'Spend a dime to make a dollar.' No one ever made money by stuffing the mattress with dollars.
Most families spend anywhere between 20% and 36% of their gross household income on mortgage and credit cards. The average U.S. Household has at least one credit card with an average balance of $9,200, according to CardWeb.com. This is when it is necessary to put that pencil to paper and budget your income. It is crucial not to spend more than you can afford to spend. Unless…
Bad Debt: is incurred on things you can't afford and that you don't need such as that high interest rate on your credit card that is maxed out. If you buy something that has no potential to increase in value, or goes down in value-furniture or appliances-that is bad debt.
Good Debt: can be described as that debt which occurs when you purchase something you must have but do not have the cash to acquire it. Your home is an excellent example of this. College is another example. The problem arises when your loan payments exceed your income, or more than you can comfortably afford to pay back.
Now consider this for a moment…
Good debt can also be when it is tax-deductible. If you could take out a mortgage that was more than you could afford to pay back, it would seem to be financial suicide. Except… if you take out this mortgage and the property gives you a positive return on your dollar. It means that it pays you more than what you are spending on the mortgage and other maintenance expenses. That means your money is working for you, and describes positive cash flow: an example of very good debt.
Investment properties have GREAT TAX BENEFITS. So, the decision to incur more debt for investment properties should be discussed with your tax advisor and real estate professionals.
Related Tags: real estate investing, buy investment property, investing in real estate, buying investment property
Investment Property Specialist - Alex Anderson Connects Real Estate Investors With High-Quality Investment Properties. Get A Free Copy Of, "The Investor's Rental Guide" at: http://www.GreatInvestmentProperty.com
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