How I Borrow FREE Money

Here is exactly how, and why, I borrow money for free - and how I use this to Invest in Real Estate. Enjoy! Add me on Instagram: GPStephan

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Now, first, I think it’s REALLY important to understand the nuances of “debt” and borrowing money - and make the distinction that not ALL debt should be placed in the category of automatically being “BAD.”

If having debt doesn’t MAKE YOU MORE MONEY - then, I think it’s safe to say - it’s automatically BAD. But, on there other hand, if you DO use debt CORRECTLY, you’ll go on to one of the main reasons I like to borrow as much money as I can…

Leverage. This is when you borrow money in order to invest…and that investment, ideally, makes you MORE money than what you owe in interest on that loan.

Now, here’s why borrowing money just makes WAY more sense for me…and exactly why I do it:

In Real Estate, you have two options for buying a property - one, is owning it outright and paying for it in cash - and the other, which is what MOST people do - is borrowing money and taking out a “mortgage.” And taking out a loan like this means you could make WAY more money than you could, otherwise.

In addition to that, the INTEREST I pay on those 30 year, fixed rate mortgages also becomes a tax write off against that rental income - which means, it helps lower my tax bill.

But, it doesn’t stop quite there…because when taking out a long term loan, we also have consider the power of INFLATION.

This is what happens when more money is printed into our economy, and the more money that gets printed, the less value our money is worth.

This is also how I’m, EFFECTIVELY, able to borrow money COMPLETELY FOR FREE - meaning, it’s CHEAPER for me to BORROW money, than it is for me to PAY for it, outright…if that sounds like science fiction, here’s how I’m able to do it:

First, I’m getting a low interest, 30-year, fixed rate loan. My AVERAGE interest rate, throughout the 3 mortgages I already have, on about $1.7 million dollars, is 3.52%.

When you consider that the interest rate is a tax write off against the rental income I make, in a 50% tax bracket, it’s essentially like I’m only paying HALF that, after taxes - or, 1.76% “out of pocket” in actual interest.

Then, that amount is also lowered by inflation - because, every year, my outstanding loan balance becomes “easier” to pay off with future money that’s worth less.

If we see that, this year - inflation was 1.76% - that means, when you factor in inflation and tax write offs - I’m getting loaned money, for 30 years, for completely FREE - adjusted for inflation. Not to mention, there may be some years where inflation is HIGHER than 1.76% - which means, in a weird way, banks will be paying ME to take out loans, to buy properties…so, in this case, it makes ABSOLUTELY no sense for me to pay this loan off early.

First, if I paid for any of my properties outright, or I paid off any of my current mortgages - I would be tying up a LOT of money in one place, meaning I couldn’t use it towards any OTHER investments - and that has what’s known as an “opportunity cost.”

Second, by borrowing money - as odd as this is to say - I’m able to diversify my investments much more, allowing me a much safer spread on my money.

Now, I will say - there ARE some advantages when it comes to paying in cash, and not having a mortgage, so I do think these are worth mentioning - just so I can give a well balanced argument to this video:

First, when you pay cash for something - you have a LOT less risk:.

Second, when you own something outright - you’ll have a LOT more peace of mind

And third, paying for something outright in cash is really, really easy.

BUT…overall, having done BOTH…I’ve bought properties outright, and I’ve bought them with a mortgage…I have to say, I’d take the mortgage route every single time.

*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available.

[WillReil]

There are two types of debt, the kind that lets you build real estate empires and the kind that lets you bankrupt yourself with designer clothes. It's important to have someone like Graham making the distinction clear.

[KaeBae_]

This is not necessarily a “how” but moreover a “why” you borrow money.... an informative video nonetheless.

[slashjimi]

You should call in to the dave Ramsay show on the millionaire hour.

[RossCampoli]

Graham uses debt strategically to leverage his ability to invest. A proven method! It’s great that he is able to communicate this to such a large audience on YouTube.

[MiaOnYouTube]

Hes like the real life version of “rich dad”

[TonyCook]

Re-write this with rates in the 7's lol

[jamesdoughty]

I like this one so much I'm going to have my daughter watch it. She just turned 18 and we are talking about credit and the value of using it correctly. All the stuff I wish I had known 20 years sooner....

Excellent job man, thank you.

[xxkingvictorxx]

I’ve been watching your videos for over a year now and they are always very informative but THIS one, wow. Just wow. Thanks Graham.

[zan]

Graham I've learned so much from you! I'm 18 right now so now is the perfect time for me to learn all this. I'm really grateful for all your work.

[brennenwick]

Feeling pretty ahead of the game having watched and smashed like on every graham video at 16 years old

[MySambo]

Graham, I am in the researching phase of my investment journey. In other words, it hasn't started yet for me. I need to understand first. And that is why I want to thank you. You answer the most fundamental questions that have seemed like smoke in mirrors to me for years. The information you share is invaluable. I've watched several of your vids and audibly gasped or felt like I needed to pick my jaw up from the floor when you explain things ppl usually charge for. This is exactly why I plan to purchase your paid courses. If you give such extremely valuable content for free, I can only imagine how valuable your paid content could be. Thank you so much for all you do. I hope to become one of your successful pupils. Keep the great content coming. I'll be sure to smash every like button I possibly can for ya bud!

[therealpaulreiser]

Graham, after 30 years of building and operating restaurants I learned something from this video! Everything you say is right on point, this is a terrific synopsis of a very technical strategy laid out simply and quickly. I have borrowed 10's of millions over the years, and never even considered that inflation was improving my return... that's good stuff young man. All of this works out well ... IF ... you get a low interest rate.... AND... IF you get it locked in. Thank you for clarifying that at the end during your wrap up. Great video!

[glengel]

I’ve never once heard Graham say uhmm, ever any in video. That in itself is amazing.

[georgerobinson]

Great video. We all strive for financial independence and better life. It’s not difficult in achieving this through the right investment, living frugally, and budgeting. I’m glad I learned early in life to work hard for financial freedom

[TreyShawn]

I've watched a lot of your videos, but none of them have touched on this idea, cash vs loan before like this. Prior to watching this, hands down I woulda said the cash option was better. It's surprising how taking a fraction of an hour to watch this changed my way of thinking so fast. Thank you man.

[JayPendragonWatches]

You actually managed to explain this in a way for me (someone without much knowledge about real estate) to understand. Also kudos on your nuanced view on this :)

[StuffyClark]

i want to see a Graham Stephan: Graham Goes Shopping At Trader Joe's

[brianw]

Great advice, I have been doing this for more than a decade. Properly managed low interest debt can be a very powerful financial tool. One way to get an interest free loan indefinitely is always pay ONLY the CC new balance and nothing more (for the interest grace). Anything else carried to the next billing cycle is an interest free loan and you can keep doing that indefinitely. If you pay the new balance every month, NEVER accept a balance transfer like 0% +3% fee, or you will pay interest on all new charges, that's a bank interest trap. Keep one dedicated card you never charge on for that purpose.

[dre]

I'm NOT on that level yet but from your advice from previous vids I know this vid will come in handy in the future. I REALLY appreciate what you do Graham, keep 'em coming. 👍🏾

[chienn]

All your videos are great but this is one of the absolute best ones. Super useful. All people need to understand the concepts you talk about in this video!