The “Borrow Until You Die” strategy, the Banks do NOT want you to know

My friend Dave Ramsey always says, live debt-free. And Dave's a smart boy, you don't know all this stuff, but if you really understood money, money cannot exist without debt. In other words, money is borrowed into existence. Our banks lend money, money is created. So when Dave Ramsey says, live debt-free, I mean, smart guy, he's a very religious guy, got Jesus behind him, he's rich. But if we live debt-free, the economy collapses. Now, debt is a four-letter word. It can make you or break you. So if you're going to use debt to the level that these guys use it, the reason I defer to them is these two guys are the experts at debt. I don't touch debt. If I need debt, I call Kenny. I think a lot of people need to understand first how it works. There's a lot of people that work really, really, really hard and they go get their paychecks like you did, the one in your back pocket. You put it in the bank. Now that bank, they owe you interest on your money. So that is a problem for the bank because they now have an expense to you. So the bank has to turn around and figure out, I need to lend that to someone else for more and that's essentially how it works. So they lend it. The keyword is lend or debt. So that could be in a car loan. It could be for a TV at a Best Buy. It could be for real estate. It could be whatever. But that's the system. The system is based on all the hardworking people out there putting their money into whatever vehicle it is. In this case, it could be a bank, could be a pension, could be retirement, could be an insurance policy. Doesn't really even matter. Wall Street is all trying to get into Main Street's pocket. That's the system. And then of course, they tax you and all that kind of stuff and that's their source of income. So what the bank has to do in this case is they have to lend it to guys like us for things that they need, like housing, right? A hundred percent. I'm kind of one of those dumb guys that has to learn the lesson the hard way. Like every lesson I've learned, someone gave me the lesson in verbal form, but then I have to go out and do the dumb thing first. You know, when I did go to college, UVSC, right? That was, I remember I was broke. Visa was giving out free t-shirts and a credit card. I got my free t-shirts and I got in a CAD class, just death, right? But I didn't understand it then. So I remember as a broke college student, you know, I'm eating peanut butter and jam. That's all I could afford. And now I have this little piece of plastic. I remember the first time I swiped it, I got a teriyaki chicken bowl. And I'm like, oh my gosh, this is way better than, you know, peanut butter and jam sandwiches. And so I started going, next time you guys are in Utah, I'm going to take you there. I started going to a place called Los Hermanos, best taquitos in the world. And after one month, I had racked up $2,700 of taquito debt as a college student. I remember when I got that to that bill and I'm like, what the heck, how am I going to pay this off? I basically mortgaged my future to buy liabilities, taquitos. I consumed them on the spot, right? And that taught me my first lesson on bad debts. And I remember Robert, when I picked up your book, the hardest thing for me was to rewire my brain to understand that debt, because I had a negative experience with the debt could actually be good too. And once I understood that, you know, once I got into the game of real estate, I realized that debt is leverage. The difference is when I buy an asset that someone else will amortize or pay off for me that generates enough income to cover the cost of the debt, that's the game. Once I understood that, everything opened up for me. Like it didn't matter if I didn't have money, debt's money, right? It didn't matter if I didn't know what to do next. Like all I had to do was find an asset that had demand to it that could be amortized by a bank that I generated enough cashflow to pay the debt. Once I started playing that game, I grew my wealth so much faster. And then the funnest part about understanding debt is money is understanding how the bank will give it back to you all tax-free. Like you could re-amortize your debt over and over and over again and opt out of the tax code by understanding one simple four-letter word, debt. Real estate isn't about money. It's about freedom. I didn't grow up wealthy, but I built my life one deal at a time with discipline, training, and systems. Ken Pro provides you with the tools, the framework, and the investor support to take action and build cash flowing assets. Black Friday sale, $100 off Ken Pro for a limited time. Your future self will thank you. Join Ken Pro today. If I could say one thing, but many people can't even pay their mortgage or their car loan, right? And be careful with debt. So once I got past paying my house, I needed more debt. And that's where I gave my money to Kenny. There are times I'll call him up, tax guy. Tom will say, hey, you need about another 100,000 or a million in debt. You get to those levels. That's like playing with dynamite. So that's why I call Kenny. I say, Kenny, I need this much debt, right? Yeah, and I'll give you the number one rule of debt. Somebody else has to pay it off. So you always defer back to who's actually paying it. If it's debt from buying a car, then that's you. If it's debt for a fourplex, then it's tenants. So you always look at who's actually paying it off. Yes, there's work. Yes, you have to keep it full. Yes, there's maintenance. Yes, there's all those things. But that is the key. You always want it to be paid by someone else. Can I add one piece to that too? Because I agree with that 100%. Maybe this could be your next book in your 7.30am study. Have you ever read Nassim Taleb's book, Anti-Fragile? Yeah. Love that book. And he talks about life as a barbell, right? And Tony Robbins has a quote on this too. He says, the quality of your life is in direct proportion to the amount of uncertainty you can comfortably live with. And it feels weird to put uncertainty and comfort together. This is Nassim Taleb's, his idea that if we're going to take on debt, leverage, right? And someone else is going to pay it off, we have to barbell that debt with reserves. That reserves are your permission to responsibly use leverage. And I've seen so many investors, dude, I almost got knocked out of the game of real estate because I didn't understand that. It's easy to lever up. It's hard to sustain through make-readies and vacancies and things like that. And so liquidity and access to cash is the barbell approach to successfully, sustainably using leverage. Yeah, reserves. Reserves are really important. We talk about reserves in our weekly Zoom. From a health standpoint, the doctor says, your cash reserves, you need health reserves. And he said, that's what took a lot of people out during the pandemic, was that they didn't have the health reserves. And I say this about debt. Just because you pay your mortgage, doesn't mean you can handle a fourplex. Right. And so that's why I look for experts at debt. I'm not the expert at debt. He is, is. Right. And that's key to the team of, because as schools teach you, you do it by yourself. But you start getting past the duplex stage or a house stage, you need people who are experts in their fields. And these guys are experts at debt because debt's a four-letter word. It'll make you or kill you. And the interesting thing about it is, the person lending it to you actually uses whatever you're buying as collateral for it. So they're covered, right? All you have to do is buy renters to cover the payment. And that's the key. It's actually that simple. A lot. It makes a lot of sense. He's an expert at it. That's why I gave my money to Kenny. I don't touch it. So he is, he's extremely good at debt and property and all this. The biggest thing is you're going to grow, find good team members. Don't do it by yourself. So my entire portfolio is not heavily leveraged. And so what does that mean? That means that if I have a million dollar property, maybe $500,000 of that is debt. So that also means that $500,000 of that is equity. So we're never really in a bad position when we use debt. There is a time where you can be too heavy in debt and it can be a problem like you were describing earlier. Well, there's also a flip side of that too. And this is where Dave Ramsey gets it wrong because if our money is debt, you never want to be out of debt either. Right. You're trying to build a sustainable level of debt. And this is why it's so critically important that you understand how debt can be converted into income. And when you do that, you kick the IRS. You just, you subvert the IRS when you go around them. You want to manage debt so it's sustainable. That's the biggest thing I look at when we're talking about winning financial freedom, retirement, a million dollar portfolio, none of that is winning. Sustainability is winning. How do I wake up free and stay free for the rest of my life? So you always need debts. You're going to counterbalance your debt with reserves and you're going to manage your debt to equity ratio, but you'll never ever want to be out of debt as long as our economy functions the way it does today. Right. So one of the things that got a lot of people in trouble is that they had this unsecured debt or floating debt. One of the keys to debt is getting fixed rate. So like my wife, she has a 2.6% mortgage on a condo that she owes and she has a lot of equity in it. And it's driving her nuts because she wants access to that equity. But 2.6 is less than inflation. So she's actually borrowing less than inflation. So she's going to keep that as long as she can. What got everyone in trouble was had these floating rates. So, well, that's why credit card debt is over 20%. In some cases it's over 25%. So when people bought a bunch of real estate in this last cycle, they based it thinking that the debt would stay the same over the period of time, but it went up. So when they got debt at 4 or 5%, it's now at 6, 7, 8, 9, 10%. And so their debt payment went up and now they're in trouble. So you really have to understand how to use debt. In my opinion, you should not be over leveraged and it should always be fixed. I want to know what my payment is going to be in 5, 6, 7, 8 years from now. The reason inflation keeps going up is America is now the biggest debtor nation in history. It's now $36 trillion plus another 200 trillion in off-balance sheet debt obligations. So that's why you have to have financial education because the biggest debtor in the world is the United States of America.