Danielle Robison argues Dave Ramsey's "debt is dumb" advice misses how wealthy people use it. With $100,000, buying one house cash nets $10,000 profit. Using it as down payments on five houses through mortgages turns that into $50,000 profit. Good debt amplifies returns.
Dave Ramsey says debt is dumb, but that's way too simple. The richest people have the most debt, so there must be more to the story, right? The richest companies and individuals have the most debt. Because the truth is, not all debt is dumb. Debt makes smart investors millions. Good debt makes you money. Bad debt sucks you dry. Imagine this. You buy a house, cash, just like Dave Ramsey says, and you can afford a $100,000 house. Forget for the moment what kind of home you're going to live in for $100,000. If you used leverage, you could buy five houses with that same money. Instead of spending it all in just one place, just put a $20,000 down payment on each one. And if the market goes up by 10%, your Dave Ramsey house is worth $110,000. That's good, but not great. But if the market goes up by 10%, your five houses are all worth $10,000 more. That's a $50,000 profit. For the smart debt investors, that's also a 50, 50% return on your cash invested. So which return would you rather have if you invested $100,000? A $10,000 profit like Dave, or a $50,000 profit? If you want the full explainer on the use of good debt, watch the leverage video linked down below.
Physicians and High Earners — What Real Estate Can and Can't Do for Your Taxes
