Why does one real estate investor become a millionaire and another is left broke and in debt? Why does one investor always have the money to make the deals and another seemingly always walks on water? Why does one constantly advance while another simply advances, or worse, simply retreats?
Undoubtedly, some investors have taken advantage of the best kept secret that will help you acquire 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 borrow determines your ability to obtain wealth.
But debt is a complex concept. Not everything is good, a fact that a surprising number of people do not realize until they are in the hole, and yet not all debt is bad. When used wisely, the right type of debt can go a long way toward building your wealth.
Smart investors know the difference between good debt (investment debt) and bad debt (consumer debt). When you buy something that immediately goes down in value, it is 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 is consumer bad debt.
In contrast, good debt is investment debt that creates value. For example, you find a good property that needs to be repaired in order to resell it for profit. You get a short-term loan from a private lender to buy the ugly house and fix it quickly. This is definitely a good debt.
Several months later, he sells the house, cancels the loan from the private lender, and leaves the title company with a five-figure check representing his earnings. Without a doubt, the best type of debt is debt that builds long-term wealth, and the number one example is debt for the purchase of real estate.
Imagine selling only two houses each month. And every time you sell the house, the loan from your private lender is immediately paid off, and you walk away with a generous check.
This may seem 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 without a down payment. No initial payment does not mean that there is no money involved in the transaction. The goal is not to use any of your own cash, and that is precisely what experienced investors with short-term investment debt do.
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 launching their businesses 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 need 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 more than 200 properties in 4 years. Not only did I borrow the money from private lenders to buy the properties, but I also borrowed the money to rehabilitate the houses. My consistent use of short-term investment debt has helped me get out of long-term financial bondage.
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 for private lenders. How about someone who works for a title company? If you have purchased a home before, you can contact the escrow officer who assisted you with your home closing. Here are some more possibilities.
■ Insurance agents
■ Association of local real estate investors
Once you get a referral from one of your valuable connections, you will meet with the private lender to discuss your real estate investment plan. Repeat the process with several private lenders and your investment business will appear to be on steroids. You will quickly be on your way to riches.
Real estate investors can’t get real wealth without going into debt. And regardless of 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 create and the faster you create wealth.
In fact, you can borrow your way to wealth.