Can you actually take debt and make
money with it? I thought all debt was actually bad. My friend, you’re actually
here in one of my investments. I’m millions of dollars in debt but guess
what? It makes me money. So today, we’re going to talk about good debt, bad debt.
Is it good? Is it bad? You’re about to find out in a powerful way that can
generate the kind of income that you’ve been waiting for in your life. So, this video today has to be made
because we have too many of you out there that are like, “Okay, I want to invest
in real estate but I am not comfortable with debt.” So in today’s video, what I
want to do is I want to help you learn how to be super uncomfortable with
certain kind of debts but I want to you to completely expand your comfort zone
on other kind of debts. At the end of this, I got a little surprise for you.
There’s a video that would be coming up next that tag-teams perfectly with this
information. I believe understanding this principle watching that video will help
you make millions of dollars in real estate. You’ve just got to wrap your head
around debt. So, there are 2 kinds of debts. One is a liability that costs you
money and one is an asset that makes you money. We have to get away from the
notion of is debt good or bad? It’s both. And it depends on how it’s being
leveraged. From just a moment, get totally backwards with me and think about this
simple principle. You can borrow money at 5% and you can sell money at 10% and
they’re both dependable. Well, if you can borrow at 5 and you can sell at 10,
who makes the 5% in the middle? You do. You know, all you’re doing is
taking low yields and turning them into high yields. And then you start saying, “Oh,
well Kris. How do I get money to put into those opportunities earning good
money?” Well, either you have to have it or you borrow it. Borrowing is stupid if it
doesn’t make you money and it’s intelligent if it does make you money.
Like for just a moment, like check out the space that we’re in. I am standing in
the studio of my Convention Center. This is a building that I bought. I had it
fixed up I can do events for thousand people like it’s super fun and amazing.
And the reality is this building, I took on debt. I took on a couple million
dollars a debt to make this project work. And yet because of the amount of money
that this space creates, it makes sense. So, let me give you a scenario here. If
you had a hundred thousand dollars, I could say… And let you know about a
secret factory that I’ve had for 10 years that I’m about to sell. And this
Factory, it’s $100,000 down payment and it’s a million dollar
factory. So, you’re going to go $900,000 in debt.
It’s just for a moment, how are you feeling about $900,000 of debt? Or
reality is you don’t know yet. It actually depends on what that debt does
for you. So for example… I’m going to put it here on the screen for you. This is my
factory. It has 2 chimneys on the top. And my factory, it costs 1 million
dollars and to get it, you have to put $100,000 of a downpayment. Now, you’ve got
the hundred grand, that’s not what’s keeping you up at night. What’s keeping
you up at night is the fact that after you put 100 grand down, how much is
going to be left over on that mortgage? It is going to be $900,000. And most of you are thinking, “Well, that just sounds stupid, Kris. Why
would I want nearly a million dollars worth of debt?” I’ll tell you why. You have
to ask this question: “What is the factory make?” And you come to find out that the
factory makes a widget and it sells that widget. And it basically produces $50,000
a month of revenue. But it has about $20,000 a month in
expenses. And this factory’s been actually going for 40 years. And its
numbers have almost never shifted. It’s almost always the same. There’s always
going to be risk when you invest. But if I have $50,000 of revenue
and I have 20,000 expenses, then how much money is left over at the end
of the day? There’s $30,000 of money that is left over and
then we’re going to call this profit. And the question is, what is my real profit?
Well, listen. If I have a 900,000 -dollar debt, let’s not take into
account that there’s one more additional expense. I actually have the mortgage on
my 900,000-dollar loan. And my 900,000-dollar loan is
costing me $10,000 a month. You have a 10,000-dollar a month
obligation. Most of you would be like, “Ahh! That’s so much money.” But after we
removed the 10,000-dollar loan obligation, what’s left over? There’s
still $20,000 left over a month which is equivalent to a quarter
million dollars a year. If you can be comfortable with $900,000 of debt, then guess what you can have? A quarter million dollar.
Now, just ask me, if I did the research on this (and this was a good deal) is this
something I would do? Would I come up with $100,000 to make $250,000 next year? Guess what the answer is? YES. And you’d be
crazy if you didn’t. So, right now put yourself in those shoes. And if you start
feeling really nervous and squirrely, what it really means is that you just
haven’t been educated on debt. That’s why I’m making this video for you and that’s
why I have another video at the end of this that I really want you to watch
it’ll be appearing in this top corner over here. Let’s talk about the
difference between good and debt and bad debt and make sure that you actually
really understand this. So, listen up my friend. We’re talking about this
3-letter-word debt. And instead of just saying all debt is bad, that’s what
a consumer should say but not a savvy investor. And so there’s a good version
and there’s a bad version. And I want to make sure that you understand how these
are different. First of all, a good debt is actually an investment. It’s designed
to actually produce money. But if it’s a bad debt, this is actually called a
consumer debt. And a consumer debt… Because guess what it does? It consumes,
it eat things. It requires things. See, the investment over here, this actually makes
you money. This one over here, it costs you money. So,
by the way, let’s just do a little quiz right here and find out what goes left
and what goes right. A boat, is it an investment or a consumer debt? A boat is
bad. The boat itself is not bad but I need my investments to pay for my boat,
okay? So, the boat doesn’t make any money, it cost me money. Now, by the way, if I
take the boat and I rent it out and I ran it out profitably, then it shifts all
the sudden from being bad to what? It goes from bad to being good. So, how about
this one? A car. Is a car and investment? If you are privately consuming it and it
costs you money and it doesn’t make you money, then it’s bad. If you are an uber
driver and you pay for the car plus you make money then it’s not bad anymore.
It’s what? It’s good. What about this one? Those where people get confused. Your
house. “Oh, well Kris, it’s real estate. It’s going to go up in value.” You know… You
know people say your house is probably the best investment you’ll ever make.
This is true. It might be the best investment because after 30 years and
your house has gone up $300,000, it represents a big part of your nest egg.
But guess what? You didn’t do it on purpose. And if you were smart, you would
have done it 100 more times. Even 10 more times. The house however I’ve
got bad news it is actually a consumer debt. Why? Because you have to pay to live
in it. It costs you money. And while it might appreciate in value, it’s not
actively producing that for you. So guess what?
Boats, cars, houses. You know, what about travel? I’m going to come up with I’m going to
spend money to go have an amazing experience. I’m not saying it’s bad. I
don’t know if anyone spends more money on travel mostly than me. Like, I’m
crazy fan of traveling. But travel also consumes. It takes your money. So, what
would actually go on this side of the line when it comes to actually
investments that make sense? Well, for example, when I buy real estate, the
question is if I do it the right way, does it make me money? Yes. Does it go up
in value? Yes. Does it provide tax benefit? Yes. Guess what? It goes up in value. It’s
an appreciating asset, okay? So, then you say “Well, Kris. What about my
business? I went $100,000 in debt to buy my factory business. Was that good or bad?
Question is is it making money or are you losing money? “Oh, well I make money.” Can it
service the debt? “Oh, yeah. There’s lots left over.’ Guess what? your business is a
good debt. Now, I’m going to write a funny one up here. I’m going to call this one a
bad business no one buys a bad business. But the business sometimes turns bad
with the way it was managed or maybe the economy shifts. People’s trends you know
shift away from the product. A business that costs you money, it’s bad. You’ve got
to actually find a way to actually get rid of that. It is no good for you,
okay? So, this is the conversation of good debt and bad debt. Now, up to this point,
I’ve given you the basics on this. But you may have heard of Robert Kiyosaki,
he’s been big in the real estate game for a number of years. He does a lot of
education out there. And there’s a lot of Robert’s philosophy that really
resonates with me. I remember when I read his first book “Rich Dad, Poor Dad”. It made
a huge impression on me understanding the difference between good financial
information and decisions and bad financial information
decisions. He takes the conversation of debt to a whole new level because he
actually talks about how you can even take a bad debt and turn it into a
productive debt. Actually make money on it. And I thought that that was
absolutely worthy enough that I want you to click the video. I want you to watch
it and then join me tomorrow on my next video or circle back and come play.
Because if you get this conversation, we should be investing together or I should
be helping you do more of it. Right now though I need you to click that video
and see what Robert Kiyosaki has to say on the matter.
Because he’s gonna do something amazing. He’s going to talk about how you take a bad
debt and actually turn it into a good debt.