I’m over $1 MILLION in Debt (Lessons of Leverage in Business and Real Estate)

I’m over $1 MILLION dollars in debt, and here’s why this is actually a GOOD thing and how you can leverage debt can make you more money. Enjoy! Add me on Snapchat/Instagram: GPStephan

Join the private Real Estate Facebook Group:

So here’s why I’m a million dollars in debt - there’s a big difference between good debt and bad debt. The reality is that almost every successful business, at some point, needs leverage if it’s to grow exponentially…especially in real estate…and how you manage debt could either make or ruin you. Think of debt a like fire. Fire could give you warmth, cook your food, bring you light…or it could burn you. Debt is very similar.

I grew up in a family that was wrecked by debt…I grew up thinking debt was awful and that credit cards were the worst thing ever. But as I began to associate with people who were just insanely wealthy, I realized…these were people who weren’t afraid of debt. They embraced it and worked the system to their advantage.

Bad debt: This is when borrow money to buy stupid things that depreciate in value and doesn’t make you money. I shouldn’t even need to explain it because this is pretty self explanatory.

Good debt is money that you borrow to make you more money. Good debt is used as a tool to increase your cash flow by borrowing money at a cheaper rate than your money makes you. And right now, we’re at the end of an opportunity of borrowing cheap money - that’s why I’m trying to grab as much as I can while rates are still overall relatively low.

This is why I’m over a million dollars in debt…I have one 30-year loan at 3.375% interest rate, and another one at 4.5% interest rate…my investments make way more than this, and I’m able to profit the difference. It allows me to invest way more long term and increase my cash flow. This is also why there’s absolutely no reason for me to pay this down early…I can pretty much invest my money anywhere and get higher than a 4.5% return, so it makes sense to invest my money than pay down low-interest, tax deductible debt.

So what does this mean for YOU and how can this help YOU?

Knowing the difference between good and bad debt will help you evaluate what you can do to maximize your profits and the amount of money you make. If you’re borrowing $10,000 at a 5% interest rate, but your money is making you 10% elsewhere…that’s a no brainer. Borrow the money, make 10%, pay 5% in interest, and you’ve just got a “Free” 5% without using your own money. This is basic real estate 101, but it also applies to just about any business.

The tricky part, from my perspective, is when you start borrowing money in the 6%+ bracket. The higher your interest rate, the tighter the margins, and the more closely you need to evaluate if it’s worth it. If you’re borrowing in the higher tiers, you need to be absolutely sure you’ll be making a higher return and that it’s sustainable…at a certain point, it becomes more advantageous to pay down debt than re-invest. If I had an 8% loan, you bet I’d be aggressively paying that down as much as I can…but a 3.375% loan like I have on one of my homes? Nope. Keep it forever.

So if you get to the point where you need to grow your business or if you decide to invest in real estate, know that debt CAN be good when managed appropriately…it’s a little like playing with fire, as I mentioned earlier. Used appropriately, it’s great…and it’s how I’ve been able to get some pretty good returns in real estate.
So don’t be afraid of debt, but manage it carefully and consider what your money is really worth!

Suggested reading:

Favorite Credit Cards:

[butteredbread]

You should call into Dave's show and pretend like your debt is a problem until you fully explain it lol

[johnnycintron]

I’m only 17 but, I’m really intrigued by the financial aspect of life. Your videos really help me understand my options and your tips have structured my strategies. Thank you for the knowledge you have shared and I hope you keep making more videos explaining both the pros and cons of the real estate field.

[HonestFinance]

High-interest debt is so, so bad. Get rid of it as soon as possible and move on

[MeetKevin]

You must not know Dave Ramsey's baby step #2! I'm not sure exactly what all you said there but I know you said you have debt and want more so *dislike*

[banahlee]

I still want to see a Dave Ramsey and Graham podcast/debate 🙂

[Classicontento]

Graham vs Dave Ramsey boxing match in the works?! 😱

[LaughtersHouse]

Step One... Debt
Step Two...???
Step Three... Profit

[MakenzieRae]

When I was 17 and starting college I wanted to start paying student loans while still in school to get them paid as fast as possible. My dad asked me "Why would you want to rush to tie up money on a 3.6% interest loan and pay those off when you can just invest them into your stocks and yield a 6%-12% return." Mind blown. 5 years later and I'm 1 year out of school with 11k in assets and 12k in student loans only having to pay $140 a month. Always make minimum down payments on loans and pay credit cards in full.

[DCDeAKz]

made it all the way through man! Im on my 4th property and Im 25 and Im constantly getting people complain about how in debt I am. now ill just send them this video to explain better ahahaha

[Lobo]

Took me 8 minutes to understand “leverage” but I think you’re converting me to the light. I respect Dave and still will follow but you’ve done a great job explaining with interest rates.

[ambaby]

WAIT UNTIL DAVE RAMSEY HEARS ABOUT THIS" LOL 🤣🤣🤣

[AshA-wwhc]

5:20 We will never see interest rates this low ever again (2018).

2020: Hold my beer.

[TheCreditShifu]

Dude, great title, I couldn't resist clicking. You serious about getting the Lambo?

[MRios]

Dave Ramsay gonna beat you up, Graham 😂

[robertm]

As a 14 year old with an intrest in financing I love your videos

[amichiganblackman]

Made it all the way through. Salute to you, Graham. That video you did with Tanner gave me the push to start my own business (Amazon fba book selling) and I'm seeing a lot of growth! My next goal is to house hack a duplex in the next 12 months to save on housing cost.
Thanks for the motivation. (I'll also send people scared of debt to this video)

[michaelkuppenbender]

I love the "I've had a lot of coffee before recording this video"

[alexmaler]

3.7 percent interest rate on a home loan? Your whole life is one big jackpot.

[userasdf]

"When the tide goes down, you will know who has been skinny dipping" -Warren Buffet. It's a good stragety when asset prices go up, when they go down is when you are in trouble...

[blakeb]

I think the main difference between good debt and bad debt is that good debt is debt in which you own a piece of capital that not only doesn't lose its value, but will actually increase in value or guarantee you a payoff. Whereas bad debt is taking on debt in which you have nothing to show for (I'll exclude college degrees because college degrees can earn you money and grant you opportunities that you otherwise likely would not have without the degree). But having debt for things like cars, furniture, electronics, etc., anything that decreases in value is bad debt to have.