EP83 How to Use Debt to Build Wealth (Instead of Fear It!)

Is debt really the enemy? In this episode, I break the myth that all debt is bad and show you how smart borrowing can be a powerful tool for building wealth. Learn how good debt can fuel real estate investments, business growth, and financial freedom when used strategically. 

What You’ll Learn:

•  Good Debt vs. Bad Debt – What’s the difference and why it matters
• How to Overcome the Fear of Debt and use it to your advantage
• Real Estate Investing & Rental Income – Leveraging debt for passive income
• Tax Benefits of Using Debt Wisely to maximize your financial gains
• The Power of Financial Education & Community for wealth-building
• Practical Strategies to Use Debt Effectively in your financial journey

Tune in now to transform your mindset and learn how to make debt work for you!

Chapters

• 0:00 Leveraging Debt to Build Wealth
• 5:55 Leveraging Debt for Real Estate Wealth
• 12:39 Embracing Debt for Wealth Building

Transcript

Speaker 1: 0:00

you have to get into debt to build wealth. Uh, sounds scary, right, because we are taught to avoid debt, but we have to change our mindsets and learn how to leverage debt to build wealth. Hola mi gente, welcome to the money chisme podcast, where we spill the real chisme on building wealth without the bullshit. Whether you're trying to invest, grow that side hustle, finally, get your money right or, my favorite, buy rental properties, you're in the right place. I'm your host, violeta, a first-gen Mexican immigrant, real estate investor, entrepreneur and your financial hype woman. Get ready for tips, tricks and expert advice straight from nuestra comunidad, porque el dinero es power and we're here to claim it. Don't forget, you can always find helpful resources down in the show notes and in descriptions, so make sure you check that out. And in descriptions, so make sure you check that out. Hola, hola, welcome to another episode of the money chisme podcast. Ahora we are going to be talking about debt and you know, cuando you think about debt, it is a negative thing. Right, we're taught to avoid debt. That debt is bad and sometimes it's. You know, people put a moral value to debt, like it's immoral to have debt, and in reality, we need to understand the difference between a good debt versus bad debt. And so, to get this episode started, I want to start off with a mantra, and the mantra is debt used wisely makes me rich. Consumer debt makes me broke. So let that sink in for a little bit, and that's what we're going to talk about today. Of you know the difference between good and bad debt, how to use debt to your advantage, and how I'm using debt to help me gain financial freedom and build wealth. But before that, we got to understand why we have so much fear and hesitation when it comes to debt. And you know, for example, with me growing up, my dad and my mom siempre was like you know what? You have to buy everything in cash. If you cannot, you know, pay it in cash, then you just can't afford it because you don't want to use credit cards, you don't want to get yourself in debt, you don't want to get a loan, you want to just, um, avoid debt at all costs.

Speaker 1: 2:52

And back then, that kind of advice, you know, kind of worked, right, um, for someone that's starting out, especially when you're not, um, very, uh, financial literate, right, it's, it's good advice for at that point in time, especially because I're not very financial literate. Right, it's good advice, for at that point in time, especially because I was a teenager and I was, you know, I was young it's good advice to like, hey, don't go out there and get a whole bunch of consumer debt, which that is bad debt Things like credit cards, even your car loan and things like that. That is consumer debt. That's debt that's not making money or increasing in value or anything like that. So I get where you know my family was coming from at that time and for many of us is the same, the same thing. We get that type of advice, but there's never a distinction between good and bad debt, and that's where we kind of like get into this problem when it does come to using debt to buy things like rental properties or businesses or anything like that. And so that's the kind of mindset shift that I want for us to have.

Speaker 1: 4:08

After listening Hopefully after you listen to this episode, you start viewing debt in a different light, of something that can be used as a tool to help you build wealth, because the rich people use it all the time. For example, they used it as a tool to use other people's money, and you'll hear it like in social media and stuff like that, as opm is using other people's money to buy assets that are going to make a return for you. Right, it's going to bring you income in some way, and they do it all the time, and this is how they can avoid taxes as well, because it's a debt. It's not income when they're borrowing this money and you could borrow against your own assets. So, for example, if I buy a property and then later take a loan on it to buy another property, I'm starting to build wealth using the bank's money, versus me selling that property and getting that tax hit because I got. I sold the property and got income. No, instead I borrowed money against it that I can deduct the interest rate from to lower my tax liability and all that stuff and buy another asset that's going to make me money, and so that's. That's one of the ways that they use debt to not only buy assets, build wealth, but also lower their tax liability, and it's all legal. You know you could.

Speaker 1: 5:55

It's just knowing the tax system and and knowing how to use debt to your advantage, versus you know going and get credit cards and you know maxing them out and all that stuff that's putting you in debt, that's you're losing money. So that's the mindset that we need to change in our community of not being scared of debt in general, like it's a healthy fear, of course, but that should be only for um, consumer debt, like credit cards and things like that. But we we need to not have that fear when it comes to borrowing money to buy, um, you know, assets. And I find that throughout this journey that I've been trying to teach uh, real estate investing to our community that's one of the biggest issues is that people are scared to borrow money to buy a rental property. They want to buy a cash. Uh, because that's the mindset that we have.

Speaker 1: 7:04

Again, even with my upbringing was that, hey, save up for it, buy everything in cash, don't go get a loan and everything like that. But it's because we don't understand how a loan works, how that debt works, what we can deduct like that works, what we can deduct like that. You think about the interest, for example, right now, with, you know, 7% or whatever it is at um nowadays. I haven't checked, but I bought a property at 6.99. I think it was, and you know people are like, oh, my God, that's high interest or whatever. But and you're getting a loan and you're going to pay this much by the end of the the uh, the loan term. By the time you pay it off, you actually paid a lot more or whatever. Yeah, but at the same time the house is appreciating, um, the rental income is paying that mortgage, the interest rate, it. I can deduct that from my rental income, so I lower my tax liability, so I pay less taxes. And so, like we don't know that part of it, we just see debt and interest rate and that scares a lot of people off from using debt to buy rental properties.

Speaker 1: 8:20

Which quick little plug. I do go into this in depth in my rental property bootcamp. It gives you all the tools and resources and helps you gain the knowledge so that way you could go out there and buy your first rental property or second or third with confidence. So that is linked down below. It's a self-paced course, so go at your own pace. And, yeah, get out there and start investing in real estate.

Speaker 1: 8:48

And so at the beginning I said the mantra debt used wisely makes me rich. Consumer debt makes me broke. And, just like I was saying, is learning to use debt to our advantage. And I use debt with real estate investing. So I am technically and it's gonna scare some people 374,000 in debt. Now that sounds like a lot of money, right, like can you imagine being that much in debt? And it it can sound scary. And when people uh start thinking about buying properties and using mortgages and loans and stuff like that, it sounds very scary. But let me tell you how much that those properties in total are worth is $585,000. So even though I'm $374,000, I think is what I said $1,000 in debt, those assets are worth $585,000.

Speaker 1: 10:00

And not only that per year it's going to make me $70,000 a year in rental income. Now, of course, you know you deduct expenses and all that stuff, but that's still money coming in because I don't have to pay it out of my pocket to maintain this property, to do repairs, to pay for the taxes. All that is through the rental income that comes in and the loan is being paid off through the rental income I get to deduct, like how I was mentioning earlier, even though I make, you know, bring in $70,000 in rental income, I'm not paying taxes for that $70,000. So if I had a W-2 job, a regular 905 job, and I had that $70,000 a year salary versus the rental income, $70,000 in salary with my W-2, I would pay taxes on that full $70,000. But with rental income I'm not, because I get to deduct all the expenses. The interest of the loan, like I mentioned, um, the, I always have a property manager, so that's an expense, because rental properties are seen as a business. So every expense that I have to, you know, have to manage that property, I get to deduct it as a business expense. So, um, the interest, the maintenance, the, uh, the property manager, things like that, all of that I can deduct, even though I received that money for those things I get to depreciate the property every year. So again, I talk about that.

Speaker 1: 11:49

Actually, I'll link the episode down below where I talk about the tax benefits of real estate investing. I did make an episode on that, so I'll link it below so you could go in depth of all the tax benefits with real estate investing. But all of that you know, using debt I was able to acquire an asset that is going to appreciate, increase, it's going to get paid off because with the income that it's bringing in, that's income that I could use for myself as well. After all the expenses and things like that also I get some tax benefits. I don't have to pay, pay taxes on the whole thing, um, and so with that, that's more money that you get to keep in your pocket, and so that's how you start building wealth.

Speaker 1: 12:39

And, um, how to use debt to build wealth, to get these assets so that way you can make income, build multiple sources of income and gain that financial freedom and build wealth. And it's the same thing when you are building a business. We have the same fear. When it comes to running businesses, a lot of us like we want to just like, um, not go get a loan for our business or anything like that, because we just rely on the income that we're making. And, uh, that really limits you because of the fear of getting into debt. But, again, all those benefits of being able to deduct, like the interest and all that stuff expenses, that works for businesses as well. Going out there and getting a loan to grow your business is going to, you know, help bring in more income and you're going to be able to, like I said, grow faster and more efficiently and you're able to like outsource things so that way you can better work on your business versus in your business. And so, even with businesses.

Speaker 1: 13:57

I see a lot of people don't want to go get a loan and because, again, the fear and the negative view that we have when it comes to debt but it can hold you back when it's it comes to your business um, it could take you way longer or you miss out on opportunities because you're not there yet, because you're limited by just the flow that you come in and it's used by the rich all the time. They go out there and get investors or they go out there and get loans to build their business so that way they can grow and make more money. And so that's what I want our community to start shifting their, their mindset and overcoming this fear of debt. It's a healthy fear, of course, but at this point it it got so ingrained in us that it especially because there was, we didn't draw a line between consumer debt and just what uh, debt that you used to buy assets, that now any debt is scary and it's really holding back our community because we want to save up for that first property, we want to save up to start that business, things like that, and instead of going out there and getting debt, so we continue to behind and and in trail behind because of that type, that fear of debt, and we need to get over that if we want to get out here and start, you know, building wealth and making change. And with that, um, because my daughter, so I have to go get her. I just want to leave you with some tips on you know, how to help you overcome and you know, so that way you could get out there and, you know, start using debt to your advantage. Um, because I was able to do so much and are I am growing faster, because if I had to wait till, like you know, be able to like, get, um, save up for a property, like I would still be with my first property, and now I'm on property number three, technically number six, but I sold the first three ones.

Speaker 1: 16:15

Uh, so you know, the first thing is just really just educate yourself, learn about how debt is used, the difference between good debt and bad debt, how you can use debt to buy assets, and, like there's so many resources out there, for example, this podcast, there's so many resources out there, for example, this podcast, but there's other podcasts. I want to say that that's one of the good things about now is that we have so many like podcasts, youtube books now, of people from our own community that are teaching these things. So you just got to go out there and look and follow the people that you, you know, you relate to, that you like or whatever, and um, just start learning, um. The second one is to surround yourself with, um people that think that way right. So I am growing my network and that is helping a lot too, and, um, it's good, good to have, because, of course, that fear is going to come up and it's nice to have somebody else that is another investor that can help guide you through your feelings or bounce off. You know, get some feedback of like, hey, I'm thinking of buying this property, what do you think? I did that with my most recent property.

Speaker 1: 17:39

I did have that fear come up a little. You know it still comes up. It's not something that you can get over. It's still going to be there. You just learn how to manage it right Through. You know talking to yourself and you know seeking out, you know advice and feedback from your network, which is what I did, and so that's why you want to have a group of people that have kind of the same similar goals investors, things like that of whatever you're trying to do.

Speaker 1: 18:09

If you're trying to get into business, you know, find a network for that. For me it's real estate investing. So I have a big network of real estate investors and so when I did have that feeling he was like no numbers look good. I mean, you did everything you did, you did your due diligence, everything like that Sounds like a good deal and it was right. But you're always going to have that little fear because it's been so ingrained in our community and ourselves that it's always going to be something that we're going to have to deal with. And it just comes with time, with knowledge, with as you build confidence. So now that I've done several deals, like I feel more confident and I can rely on my experience. Right, like no, I already did six deals and you know I learned from them. Blah, I already did six deals and I learned from them blah, blah, blah. So I get more confident in doing that. So again, when you're doing this debt, don't just get out there and go get a loan, for whatever reason. Know about the loan, do the numbers, do the math. Is this loan going to be worth it to acquire this asset and how much money is it going to bring to me? And then you decide based on the numbers, how is it going to be worth it for me to uh, get into debt? For me it was right. And so, again, run the numbers.

Speaker 1: 19:37

And, you know, start small. Like I, I did the same thing. I started. I started with one property. I started small. I I'm not out here getting like $300,000 properties or $500,000 properties like over here in California. I live in California. There's no way I would have started investing and go into debt over here and buy my first rental property. I started off small. I'm in another state that is more accessible in the price ranges of these properties, which means that I don't have to go into debt as much. So each property right now is like 70,000, 80,000 that I owe on each property right now, except the most recent one, but it's very low risk compared to what other debts I would need to be able to get an investment property over here in California. So also, like you know, do what you can right, start small.

Speaker 1: 20:48

And then the last one is just just do it. I think I was in a podcast and somebody just told me it's like man, I like that, you just go for it. And it's like I was, like I never realized that I do that. It's just once I set my mind to it. It's like, man, I like that, you just go for it. And it's like I was, like I never realized that I do that. It's just once I set my mind to it. I'm like you know what, I'm just going to go for it, like I I learned about it. I have, you know, a network that I have that I could, you know, ask things about, like about this property, and you know, get their feedback on and you know, get their feedback on.

Speaker 1: 21:18

I did the numbers, like I'm just going to go for it. And that's, I think, one of the things that we just got to do. Like, do the thing that's scary, do it, you know, with a good risk analysis, right, like, don't just go out there and just do it. You know, follow the other steps that I said, like running the numbers, starting small, educating yourself or or whatever, but do the scary thing, go out there and do it, take action. It's gonna be scary. It's gonna especially with that, it's gonna be super scary. You're like seeing that and you signing your paper and you see how much you're going to owe. It's going to be scary, but remember that it's going to bring in money. It's going to be worth it. It's a proven strategy.

Speaker 1: 22:08

There's a historical evidence and statistics of people investing in real estate, using debt, making money and building wealth and continue. That's how all these rich people have done it, and so our community. We just need to get out there and start doing these things and overcoming our fears of debt and risk. Risk is another one, but I'll do another episode on that one, because that's a whole nother thing that we have to overcome as well. But hopefully this episode was, uh, helpful, don't forget, there's resources. Uh, and, down below, don't forget about rental property boot camp if you're interested, and, as always, you could always email me, dm me if you have any feedback, questions or whatever, but I'm here to always help our community. But in that, I will see you in the next episode. Bye.