My Property Investment Tip #20
Time Makes Debt Irrelevant.
Now this one is a more difficult one for some to get their head around. But time will effectively pay off your debt for you…
Yeah ok crazy man you’re thinking, but it’s true.
In 1970 in Brisbane, you could buy the average home for $8,500. But the average salary was only about $2000 per year.
But you can guarantee that the young couple buying that property were just as intimidated then by the prospect of paying off an $8000 mortgage, as a young couple is today of paying off a $500,000 mortgage.
In their mind they were probably thinking “It’s going to take us forever to pay this thing off!”
But now, 50 years later they’re in retirement, and they’re saying… “the best thing we ever did was buy that house in 1970 and hang on to it”.
….And if they still had that $8000 mortgage, they wouldn’t care…. because time has made that mortgage irrelevant.
This is the beauty of investment properties. Because they will generate income forever, they can service debt forever. And as time goes by, even without paying off that debt, it will feel like less and less of a burden, as the rents increase and the value goes up relevant to the debt amount.
Believe me, in 50 years from now, $500K will feel like $8K does today.
This is also why investors elect to go with interest-only loans. It’s much better to focus your efforts on acquiring more income & wealth creating assets with your spare cash, than it is to pay off the ones you already have (that don’t actually need to be paid off)
Does that make sense?
Let me know your thoughts below
– Daimo