So a question for you financial gurus. I have typically always been a pay cash for everything kinda guy outside of my mortgage. About 5 years ago I realized this was a big error for me. I have been using margin on my investment accounts to make some real estate purchases given the interest rates have been incredibly low to do so. My debt is currently about 12% of my total assets. It got me to thinking, am I still being too conservative in leveraging my assets to make even more of a return or do yall think that is a comfortable level to be at? Current interest rate on margin is about 1% simple interest. Do yall forsee interest rates staying this low for a couple of years or do you think they are headed upwards this year given all of the stimulus?
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I think you're fine. Gives you wiggle room. And interest rates will begin going up if Biden gets the whitehouse. -
I'm a "pay cash" for everything guy myself. I don't think there is any such thing as "good debt"...there's always risk involved when you have debt. But I know I'm in the minority.
There are alot of people who use borrowed money to make money and end up OK...but my personal history with debt didn't work out like that. Hence the philosophy of paying cash for everything!
It's hard to think the interest rates are going to go any lower than they are now. If you're going to borrow money, now would be the time to do it.Comment
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Good debt?
I really can’t foresee interest rates rising in next 4-5 years. The Fed has been pumping the economy with cheap money for so long that any increase in rates would make the debt unserviceable for many companies and individuals. Oh not to mention the US government.
Sent from my iPhone using TapatalkLast edited by Colonel_Reb; 01-05-2021, 06:12 PM.Comment
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This. I can't see them raising rates for a very long time.Originally posted by Colonel_Reb View PostComment
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This is a math question, versus peace of mind question.
Yes using debt with a SUCCESSFUL investment wins the math game all day long. It’s when the investment isn’t successful you wish you had no debt to weather the storm.
Pick a mix that gives you peace.
As said in Proverbs: the borrower is slave to the lenderComment
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Thanks for all the comments. I guess this ^^^ is more of what I was getting at. I have profited handsomely on my "borrowings" so far to fund additional investment. Im leveraging into real estate and not stocks or commodities and can afford to pay back those borrowings at anytime should I need to. Im just wondering if there is a ratio/percentage that most experts feel is conservative. Im constantly looking for additional real estate deals that are no brainers and just wonder where I need to stop borrowing cheap money and just pay cash again for it.Originally posted by Double C View Post
I remember when the market crashed in 2008. I was pretty much fully invested and was sitting there thinking I wish I had money to drop into the market at those low levels. I wish I would have thought about using margin back then to do so.
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I always thought good debt is what you had when you were younger and trying to build your credit. After that you should be striving to be debt free.Comment
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^homeboy missed that memoComment
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Don’t fight the Fed. I’m considering more leverage in a non-traditional sort of way (borrowing more than I need in student loans to put to work on the short dollar trade, pending results of tonight’s election). Hell, Biden wants to forgive 50k in student loans anyway and if he has both chambers, it’ll probably get through. Would be dumb not to take advantage of that.Comment
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As the old cliche say's: Hind sight is always 20/20.
Personally, I would wait a little longer. Or till after the first quarter to see where we are headed. But that's just me. Where do we expect the country to be 3 years from now?Last edited by Texas Grown; 01-05-2021, 07:40 PM.Comment
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I divide my philosophy up into personal debt (residence, cars, toys, etc) OR investment debt.
Personal stuff I like zero debt. Peace of mind and being free of pressure is huge.
For real estate investments that can cover the debt note safely plus cash flow, I like cheap debt. The math is too strong to ignore. Percentage is dependent on the asset type (single family, multi family, self storage etc)Comment
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