The Importance Of Leverage In Building Your Property Portfolio In Australia

Here is what you will learn by watching this video;

The key to becoming a successful property investor is to become an expert in ‘Finance’, and obviously the ability to conduct ‘unbiased property and market due-diligence’, (which will most likely be the topic of my next book)…but it’s your knowledge of finance and ability to understand who to correctly access and structure finance that will ultimately determine you net wealth long term, not your ability to master property selection.

I know that I sound like a broken record here guys, but put very simply, property investing is not about property itself, it’s all about structuring finance (good debt) correctly. So if you think you are in the game of property, you’re not, this game is all about (good) debt structuring. From my years of observing the most successful property investors, I have observed that in virtually all cases, 80% of their ‘focus’ is always on ‘creative deal structuring’ and ‘debt accumulation’, while simultaneously maximising their usage of other people’s money (OPM), via Loan to Value Ratios (LVR), and only spending 20% of their time on due-diligence on the actual property and suburb itself.

Now don’t get me wrong here… I am not saying that you should not spend ‘any time’ learning and cultivating your ability to conduct ‘unbiased property and market due-diligence’, as making a mistake in property can cost you hundreds of thousands of dollars, and set you back decades, if you consider the opportunity cost of not being able to buy more property, if that is your ultimate objective. What I am saying is develop your financial literacy first, then focus on finding the very best property that you can afford to buy.

It is clear that wealthy individuals have learnt two important distinctions about debt.

1. Firstly, that not all debt is bad; there is good and bad debt.

2. Secondly, the more good debt you control, the wealthier you become. And,

3. Thirdly, having debt is not a problem, and only becomes a problem if one cannot get more debt. (you can use debt to service debt)

They understand that ‘good debt’ consists of borrowings to acquire assets that appreciate in value, such as property, shares, businesses, etc. ‘Bad debt’ consists of borrowings that depreciate in value, such as Plasma Screens, Cars, Boats, Holidays, etc

The ultimate goal of a property investor is to control the maximum good debt that one can safely manage.

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