I am $739,116,258 in debt. Here's what your school teachers will never teach you about money. So it's important to understand that debt is a strategy. It is literally leverage. That's all it is. It's a financial tool to get higher returns quicker by using other people's money or OPM. That's all it is. So to fully understand this, you need to first understand how money flows through a system. So when you go get your paycheck and stick it into a bank, it becomes a liability to the bank because they owe you interest on your money. That bank, of course, then has to loan that back out in the form of a loan. So you have savers and you have borrowers. And in the middle, you have the bank, let's say. So a lot of people are just savers. And when they have all their money and savings sitting here, that's fine. The bank is now paying interest and that becomes an expense for the bank. So then the bank takes that money from the savers and they loan it in the form of debt for projects that actually cash flow and things that they can have collateral against. That's the way the system works. Once you understand the system, you'll realize that Wall Street, for example, is entirely based on managed money and is trying to find people, boots on the ground, to be able to invest. That's the way the system works. So the way you play the game is simply as easy as finding an asset that makes financial sense, finding the people that want to lend against it, and then executing the transaction. That's it. So in my particular case, let's say I'm buying a 200 or 300-unit apartment building. The lender, of course, is who's going to pay back that loan. Well, it's actually the tenants. The tenants that actually pay the rent flow all the way up and pay all the expenses and, of course, the loan. So that's how the system works. So I go find the apartment building, bring it to the lender, they lend against it, and then the tenants actually pay it all off for you. That's good debt. Then as the value of that asset goes up and up and up, then you go back and you do cash-out refinances. So you actually don't sell, which is buy, borrow, die, because I can transfer those assets to my trust, to my estate, to my kids, to whoever I want. I don't actually need to sell them. I'm not trying to time the market and have some big capital gain. What I'm really trying to do is generate as much cash flow as I can and then keep going back to the bank and just harvesting that money. So I say harvesting cash. Here's a simple example. Let's say I bought a house for $200,000 10 years ago. That house is now worth $400,000, but you now only owe $100,000, let's say, because you paid it down for a while and you have $300,000 in equity. When you go get a loan against that house, it's a cash-out refinance. That's what it's called. That's tax-free because it's debt. The bank is actually lending against the house. Again, you're taking advantage of getting some of that equity out of that house. Yes, your payment has gone up more than likely because you're now harvesting that money. That's why we keep our properties long-term and focus on growing the value of the assets and then just keep harvesting by putting on more and more debt and be able to return that money back out to myself and my investors tax-free because it's debt. When you sell something, the IRS wants their pound of flesh. They want their tax. But when you don't sell it and you just keep harvesting that money forever, then of course that's a cash-out refi. And you just transfer that into your estate planning later to the future generations. Debt can magnify potential returns, and that's what we're trying to do here. The ultra-wealthy have a strategy of buy, borrow, and die. If you think about it, it's true. What they do is they buy, they borrow as much as they can of good debt, and then they transfer it to their heirs later through estate planning and trusts and things like that. There are lots of ways to transfer wealth and not pay tax legally. The first one is debt is a strategy, and it should be used as a strategy to increase your personal wealth. The second one is people use debt all the time. They use it to buy houses. They use it to buy cars. They use it to buy even flat-screen TVs if they need to. Why is it that most people primarily have 70% of their wealth tied up in their personal residence? Why do people use debt to buy houses and cars, but then they stop right there? They don't actually use it for investment. It doesn't make any sense to me. When you buy a house or a car, then it's actually you that actually is paying it back through some other source of income. When you use debt to buy investments, the point, of course, is to make sure that it's paid off by somebody else. Over 70% of people's wealth in the USA is actually tied up in their personal residence. So why do they stop at just buying a home and then using their paycheck to pay it off? It doesn't make any sense. When right in front of them, the majority of their wealth is sitting in their own home, but yet they take their money and turn it over to financial planners and other people to manage it for them, when the majority of the money they already made was to purchasing a home by using debt in the first place. A lot of people say debt is negative or debt is bad, and you hear this over and over and over. Well, then why is it that most people use debt to buy cars and buy houses and things like that, and then they stop right there? When the majority of wealth in the United States is actually sitting in equity in most people's primary residences, why do they not use that same philosophy of getting debt and then buying assets that produce income? I would even say that using debt to buy a car that depreciates is not good debt, but using debt for a car that gets revenue through something like Turo might be good debt because you're actually getting cash flow. Same car, same debt, but one's producing income and one is not. If you invest for the long term using debt, you're going to get very wealthy because what debt can do is it can magnify the potential return of whatever it is you're getting. By the way, this is not for the faint of heart because there are many risks from getting into too much debt. The key is whatever debt you get, there's somebody else actually helping to pay it off. For example, if you're buying a vacant piece of land with debt, the problem is there's no one to pay it off. On the other hand, if you're buying a piece of land, let's say near an Amazon plant, and they don't have enough room to park all their vehicles, and you cut a deal with them to park all their vehicles on that same vacant piece of land. Now you're using bank debt to buy that piece of land, but your plan is to generate cash flow from rent to be able to park the vehicles on it. That would be considered good debt. Key to borrowing, of course, is who's going to pay it off. It's either going to be you or somebody else. Now that somebody else, you better make sure that whatever it is, whether it's a business or real estate, that you have a really, really good plan, a plan A, plan B, plan C, to be able to pay that off. And of course, reserves in the event something happens and they move out. For example, there's a fire and you're not insured or whatever it might be. There's a number of things that could actually happen negatively if you're not set up for all the potential things that could happen should you not have that other person that could actually pay off that loan for you. The most important thing with debt is to start small and just make sure it cash flows. Don't try to time the market at all, because if you do that, that's when you get burned. Have a long-term approach. Use debt the way it's supposed to be used. Low leverage and let the property grow in value. And then just use more and more debt to be able to harvest that money out in a cash out refi tax-free. And that's a much better way than actually turning it over to somebody else and not knowing exactly what your money's doing. Now, I know for a lot of you, this might be overwhelming, but I can assure you that I started just like a lot of you with a two-bedroom, two-bath, $116,000. I put 20 grand down, and I borrowed the rest. But I made sure it cash flowed on day one. So I've done this, and I just replicated that process on a very small level over a long period of time. And then one day, I just decided to buy bigger and bigger properties. So here I am almost 25 years later. So it's easy for me to say that I'm over $750 million in debt. But I can assure you, it was a long process. I'm sure many of you think that running a company this size is stressful. But I can assure you, it's far different than what you might expect. Please click on the video to see exactly how I structure my day.
