I enjoy breaking up the myth that debt is bad and how other financial gurus tell you to pay off your credit card debt before you begin to invest.

Why do I say invest instead?

Because you cannot create wealth when you focus on paying off consumer debt. While I admit consumer debt is bad, to only focus on getting it paid off and delay investing is even worse.

Too many people use credit cards (consumer debt) to buy items that lose value over time. Any sane individual should avoid this kind of debt like the plague.

However, getting into debt to acquire an income property is another matter entirely. And our tax system in the United States is designed to reward you for taking on investment debt.

It took me three years after I turned 50 to save up $18,000. I could have used that to pay off my credit card debt following my second divorce. Instead, I continued to make the minimum payments and used that $18,000 to invest in a three-unit rental property with my wife and a Realtor.

If I paid off my credit card debt instead of investing in real estate, I would be debt-free, but still have to work for a living. I would have no debt AND NO INCOME PRODUCING ASSETS. Five years later that $18,000 was worth $125,000 because I invested in real estate.

If I used that $18,000 to pay off the credit cards, five years later I might have accumulated $30,000. I would not have $125,000 in real estate. And this was real money because we sold that property and did a tax-deferred exchange into a 15-unit property.

That original $18,000 is now worth $1,650,000 to me and generating $95,000 of passive income per year. Would you rather have $1,000,000 in assets, or have no debt?

And I am not addressing all the other money I borrowed to make down payments on other apartment buildings. I am just speaking about ONE investment I made from that first $18,000 that I saved over three years.

By the way, guess who is paying the mortgage loan on the property? Well, yes, I am writing the check, but the money is coming from the rent the tenants pay. That is good debt; getting an asset that grows in value and someone else is providing the money to make the debt payments.

So, if you want to create wealth, borrow money to invest in income-producing real estate (good debt). If you want to be debt-free instead, then just be ready to work for the rest of your life.

To Your Prosperity,