Smart investors categorise property borrowings in two ways, as productive debt and non-productive debt.
Productive debt is used to purchase assets that will grow in value and help contribute to financial independence.
Non-productive debt is for consumable items that don't increase in value or provide income - this includes cars, holidays clothes etc.
It’s usually sourced by the use of credit cards or personal loans, where as the residential property investor uses productive, tax-effective debt to make money through capital growth.
Most people who buy an investment property already have a home and use the 'Leverage Factor' because it's a ready made "deposit"and allows the investor to borrow up to 100 per cent of the purchase price of the investment property plus costs.
Wise use of this equity in your home can put you into wealth-creating assets much more quickly than if you wait until you own it outright.
Productive debt is used to purchase assets that will grow in value and help contribute to financial independence.
Non-productive debt is for consumable items that don't increase in value or provide income - this includes cars, holidays clothes etc.
It’s usually sourced by the use of credit cards or personal loans, where as the residential property investor uses productive, tax-effective debt to make money through capital growth.
Most people who buy an investment property already have a home and use the 'Leverage Factor' because it's a ready made "deposit"and allows the investor to borrow up to 100 per cent of the purchase price of the investment property plus costs.
Wise use of this equity in your home can put you into wealth-creating assets much more quickly than if you wait until you own it outright.
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