Could this be the reason why there are fewer clients calling?

Started Feb 12, 2013 | Discussions thread
Biggs23
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Re: Could this be the reason why there are fewer clients calling?
In reply to PenguinPhotoCo, Feb 14, 2013

PenguinPhotoCo wrote:

Debt is not bad.

Yes, it is. Debt is inherently bad. However, it is also sometimes necessary.

I say you can shoot a school next month and make $10,000 profit. But you need, up front, to have 2 shooting stations (tripods, lights, BGs, stands, cameras, etc) and you don't have some of that, and no cash to get it.
So you put $2500 on your visa for 6 weeks to make $10,000. Good debt.

Nope, still bad debt. What happens if that school cancels? What happens if much of that gear is stolen the day before the shoot and you can't complete it? What if... lots of potential problems. Debt is always bad but it's not always the worst choice.

You can save up and buy a house for $150k. Say it takes 20 years.
Then save up and buy another to rent out, takes another 20 years.
You have no mtge on either - so $700 a month saved on the first one and pure $700 in profit on rent on the second. For the first 20 years you paid ever increasing rent to someone else.
After 40 years you have $300k of eqiuity in teh two houses and bring in $700/month for 10 years say, then die/retire whatever. You have $300k in houses and $84k in rent buried in your back yard.
OR - since you're saving $7500 (as in above to buy the house) a year in 4 years you have $30k to put down and you buy the first house, paying $500 a month mortgage (since you're not financing the whole 150k). This will be less than your rent payment.
So now you can save $10k a year and in 3 years buy the second house to rent out. It too has a $500/payment AND you get $200 a month in more rent to add to your savings- so now you're saving $12,500 a year.
So 7 years in and you've got the first house 1/2 paid off (15 year mtge, not 30!) - $90k in =equity (30k down, 120 finance and 1/2 paid off). $30k equity in the second house.
At the 15 year mark in scenario 1 you have no houses at all but have $112,500 in the bank.
In scenario 2 you have the first house paid off ($150k equity) the second half paid off ($90k in equity) and have been saving $12,500 a year for 8 years, so $100,000 cash.
No debt - $112,500 to your name.

Your numbers were off in a few places above.

With debt (used wisely) - you have $100k cash AND $240k in real estate equity.

Yeah? How do you know? How do you know that you have that much in equity? Is equity a sure thing somehow? I think the last 5 year or so have told us that equity isn't a given.=

Debt is NOT bad, not at all. It is a tool and can be used to your advantage.

Debt IS bad, always. Sometimes it just happens to be the best choice anyway.

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Any opinions I express are my own and do not represent DPReview.

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