The book Rich Dad Poor Dad by Robert Kiyosaki is the reason I got into real estate.

 

I don't really follow Robert anymore, as he's turned into a real kook, but when he showed up in my feed saying he's $1.2 billion in debt, I noticed.

 

A billion. Not a million.

 

The clip went semi-viral with a funny cloud of disapproval: isn't this financial influencer guy supposed to know about money?

 

His wife later clarified that the debt is not personal – it's mortgages on huge apartment buildings in Phoenix, where he's a partial (and minor) owner. So it wasn't all his personal debt.

 

Also, of course he has debt – he's in real estate. The whole point is teaming up with the bank. Besides, that debt gets paid by the tenants.

 

As he's been explaining in books and online for the last 30 years, debt someone else is paying off is “good debt.” The debt you are paying off personally is “bad debt.”

 

But not all bad debt is bad debt. The real distinction is debt vs. financing.

 

 

Financing is a choice. I could pay cash for a car, but spreading payments over 5 years at a low rate might make more sense. So I finance it.

 

You can finance with a loan, or a credit card. Klarna and its ilk, I would consider financing, too (avoid Klarna).

 

Debt, on the other hand, is borrowing to buy something you can't currently afford – houses, student loans, whatever.

 

So you read these articles about rich people having mortgages, which seems crazy. Beyoncé could pay cash for her house. So could Mark Zuckerberg. Why do they have mortgages?

 

Because if you can borrow at 5% and invest that money at 10%, the loan is essentially free, and you're making money on it.

 

So, they finance their houses.

 

 

I would consider my current house loan debt, because I could not pay cash.

 

But the choice to not pay it down, which is a choice I make monthly by not adding extra funds to the payment, is a choice to finance it – I have better uses for my money than paying off a loan. Right now.

 

Also, it's weird, but I love borrowing money. I'm always hunting for loans because loans are how deals happen. I'd get into chicken farming if there were 10% down chicken farm loans.

 

(I got my first credit card, and a free t-shirt, at USC – a practice that has since been outlawed: giving credit cards to 18-year-olds on campus. I still have that card, and fondly remember using it for a cash advance that became a 5% down payment on a property. Follow for more insane real estate tips!)

 

So yes, financing my house. That said – and this took me by surprise when I read it recently – financial advisors and personal finance columnists? A surprising number of them have paid-off houses, according to this book. Which makes me wonder if I should, too.

 

But probably not yet – I think my money is better invested. But it's on the long-term retirement agenda.

 

 

And this is worth repeating and internalizing. In an inflationary environment, which I think we will be in for at least the next 10 years, you want debt.

 

Why? Because inflation shrinks your debt. For free. Exponentially.

 

Here's one way to think about it: the money you use to make future loan payments buys less than it did when you first borrowed it. 

 

Or more simply: I lend you $10,000. You can pay me back now or in 20 years. You have the money now. You obviously say later because in 20 years, $10K will just be way less money.

 

 

Yes, rates are high, and homes are expensive (though prices are coming down, meaningfully in some areas – more on that next week).

 

Remember, don't sweat your good debt, and for sure don't sweat it if you're wisely choosing to finance. But $1.2bil might be too much, even for me.

 

       -Brock

🌾 🏘 Entire California town with 35 buildings goes on the market - for only $7mil.

↕️ ↕️ History Shows That Adjustable-Rate Mortgages Pay Off For Homebuyers Most of the Time.

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