The Reluctant Landlord

  • Home
  • About Us
  • Archive
  • Work with Me!
    • Guest Post
  • Contact
  • Disclaimer
  • Self Management
  • Military & Real Estate
  • Buying & Selling
  • Property Manager
  • Our Strategy
  • Books
You are here: Home / I am an Empire Builder / Why Having House Debt Makes Me Happy

Why Having House Debt Makes Me Happy

September 28, 2014 by Elizabeth Bennett Colegrove 1 Comment

This post may contain affiliate links.

Did you know that debt is one of the best kept secrets out there?

Debt as leveraged property is one of the best kept secrets because it allows one to invest someone else’s money while keeping your own money fluid. Now, don’t get me wrong, there is good debt and bad debt (just like good cholesterol and bad cholesterol).

Why Having House Debt Makes me Happy

The Difference Between Good & Bad Debt

Bad Debt

  • Consumer Debt (TV, computers, eating out)
  • Vacations paid on credit
  • Spending MORE money because it’s on a credit card

Bad debt is basically buying things you can’t afford or wouldn’t buy if you had paid cash.

Good Debt

  • Cars that you were already going to buy but were instead able to purchase at 0% and reinvest the money
  • Houses – especially ones that you are going to have as future rentals.

Having House Debt Can be Good

A mortgage allows you to leverage investing in more baskets.

I am all about building different investing baskets, trying to diversify as much as possible in areas that I am comfortable with.

For example, we invest in Thrift Saving Plan (TSP), Single Family Homes, Town Houses, and multiple other areas. My husband also hopes to have a pension through his employer, the Navy. I invest in my employer’s retirement plans as they are available.

At the same time, we are young and are very early in our career. So we don’t have a lot of money. We are able to diversify to the extent that we do through leverage. We put as little down as possible and borrow money from the bank.

While the most recent crash and historical crash shows that leverage can cause great heartache, they can also be a fantastic tool!

We have more than $700,000 worth of debt with $70,000 of our cash in real estate producing $18,000 a year in dividends before repairs. That is a 26% return. Our cash on cash return would be 2.5%.

Historically Low Mortgage Rates

As already illustrated by the rising mortgage rates, these low 30-year loan mortgage rates will soon be a thing of the past. The great thing about US mortgage rate practices is you can lock into a rate for 30 years.

Although you have private, mortgage insurance for anything less than 20%, under most loans those falls off after you reach 78% of the loan value. Of course, it also takes a phone call notifying the mortgage company.

While this strategy will not be around forever, until leverage no longer makes sense, I am its biggest fan.

0

Filed Under: I am an Empire Builder Tagged With: debt

Comments

  1. FoglesongMi says

    November 12, 2014 at 2:21 pm

    This is one awesome article post. Much obliged.

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

I love my family, my country and real estate. My goal is to retire early through frugal living and real estate investment. I am making great strides and want to share the information I've learned through the process. Read More...

CHECK OUT MY BOOK!

Sign up for the Newsletter
JOIN HUNDREDS OF OTHERS IN RECEIVING OUR FREE WEEKLY UPDATES STRAIGHT TO YOUR EMAIL INBOX!

Most Popular Posts:

  • How to Create Freezer Meals for One Person
  • 3 Ways a Landlord Can Split the Utilities
  • How to Set Up Your Rental Accounts
  • The Solution to a Broken Lease: The Buy-Out Clause
  • What are a Military Widow’s Death Benefits?
  • How to Write a One Page Lease Renewal!
  • How to Write an Incredible Lease
  • How to Get Rid of Cat Urine in Cushions, Carpet and Clothes
  • Is it Worth Buying a House if You Move Every Two Years?
  • Landlords: Should You Include a Washer and Dryer in Your Rental?

GET THE BUTTON


More Posts from this Category

Search

Categories

Archives

Copyright 2023, The Reluctant Landlord. All Rights Reserved. Custom design by Pixel Me Designs
Sign up for the Newsletter
JOIN HUNDREDS OF OTHERS IN RECEIVING OUR FREE WEEKLY UPDATES STRAIGHT TO YOUR EMAIL INBOX!
[close]
Brought to you by
Displet