E510 | How To Effectively Use Debt

Most of us look at debt as a bad thing. It definitely can be, but it can also be a tool you can use effectively in your business to scale. This is something every business owner needs to know as they look to grow their practice past themselves. I even show you a real example of how I leveraged debt to basically get a FREE VEHICLE last year. I know that's a bold statement but listen until the end to see how I did this.

• Consumer debt for lifestyle purposes
• Leveraging debt for a new vehicle

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Podcast Transcript

Danny: So I was having a conversation with one of our staff members about documentation and he had come over from a in-network practice that he was working at and he was talking about just how long it would take him to document and click through and the workflow and how, just how time consuming it was and how much easier it's been with the software that we use, which is PT everywhere.

And I know for us, we're very aware. Sort of time leaks within our staff and our own schedules. And it's just one of the worst things you can do is just waste time on things when you could be doing them more efficiently. One thing for us is we have to document. It's something we need to do and you need to do it as efficiently as you possibly can because that's where you're gonna save a lot of your time.

We were seeing our staff members save upwards of an hour a day as far as cleaning up his documentation, making it more efficient. What if you got an hour of your day back just from documentation? What if all of your staff did the same thing? Highly recommend you take a look at PT everywhere.

It's been a huge time saver for us and really has made a big difference. So here's the question of our practice. How to physical therapist like us. Who don't wanna see 30 patients a day who don't wanna work home health and have real student loans create a career and life for ourselves that we've always dreamed about?

This is the question, and this podcast is the answer. My name's Danny Matt Mate, and welcome to the PT Entrepreneur Podcast.

Hey, what's going on guys? Doc Danny here with a PT Entrepreneur podcast and the PT Entrepreneur Facebook group. If you're listening to this on the podcast and you want to watch the video training that goes with this I'm gonna walk you through a screen share in this training. Definitely head to Facebook, join the PT Entrepreneurs Facebook group.

Totally free. There's about 5,300 people I believe that are in that group at this point. And there's a lot of other training in there that you can check out as well. That should be helpful on any number of other topics. But I'm trying to do more of these. My wife got me an iPad for Christmas, and I just figured how to do a screen share with this about a month ago.

So I've been going crazy on trying to put some trainings together that I can actually use this little apple pencil that comes with it, which is awesome. But it helps me clarify some of the things that I'm saying and hopefully it helps you understand some of these topics as well.

And I plan on doing quite a few more of these because I think it's a really good way to educate and especially with topics that involve math, right? I'm gonna. Going over some effective uses of debt. So like how to actually talk or look at debt, what types of debt?

And give you some real life examples of what I've done. That's not necessarily traditionally just what people hear about debt, which in most cases is like Dave Ramsey talking about how terrible it is. And in most cases it's actually bad. Let's just clear that up. Most people have too much of the wrong kind of debt and not enough of the right kind of debt, or they don't make decisions based on how they can leverage it effectively.

And and we're really talking like consumer debt, credit card debt. That's what most people end up, in problems cuz they're essentially taking on debt to fund their lifestyle, which is not necessarily a good thing. So I'm gonna talk through some scenarios with this today. I hope this helps you.

I think this is something that, I wish someone would've taught me like 10 years ago. Maybe, yeah, I wouldn't even understand what they're talking about. Maybe you're not gonna understand what I'm talking about. But you're gonna, maybe go back to this in a couple years and be like, oh crap.

That's it. That's what he's talking about. Cause now you have this opportunity with your business to decide like what you're gonna do with that or not. Let me share my screen and we'll go ahead and get and get started. Effectively using debt. That's the title. That's what we're gonna talk about.

And what I want to get into is a couple things, and I'm gonna try to just make this as clear and concise as possibly can. But debt is basically where you're borrowing money from somebody else. It could be a bank, it could be another person or another business. It could be any number of things, but that's basically what it's right.

In my opinion, and what I've found with my own businesses and investing is there's not all debt is the same. S some debt is almost an asset in a way because of h how you can leverage it to do other things and then other debt is a really bad thing and you wanna shy away from it.

Let's start there and we'll talk about the effective use and which ones you really wanna try to look for. So the first thing, when we really look at like debt, That is, I consider, like good debt to, to take on. It's really fixed debt in particular to buy assets and and or invest in your business.

So for instance a mortgage I actually don't think is bad. I think it's good debt. And the reason why is. It's usually fixed. It should be if you can, right? So let's say you can get a, a 4% fixed interest rate for 30 years on a house in an area where you're pretty confident that if it's going to continue to, appreciate and people are going to move there and the economy is strong.

And over the course of those 30 years you're paying a small percentage of the loan versus if you try to save up all the money to buy that house, let's say this house costs $200,000. If you try to save up $200,000 to buy that house in cash, by the time that you went to do that house would probably be worth twice as much because of.

The appreciation of assets and frankly, inflation being part of that. But inflation also occurs on fixed assets, on, on hard assets, like a house, just like it would on, the price of gasoline or a commodity or something like that. You're taking on. Debt at a fixed amount for something you're gonna live in, which is you need anyway, right?

And you're going to then pay that back slowly over time. But the thing that you're buying is gonna be worth more by the time that you sell it than what you bought it for. That's a pretty good use of debt, in my opinion. Even better if you can take on fixed debt to buy an asset that's then gonna cash flow for you, let's say a rental property that somebody is basically paying the debt off for you.

Even b even better scenario, right? That is what I consider like good debt. Debt that, that is, is worth looking at as being part of your in. Thesis or your risk tolerance as well. The other area is looking at arbitrage and where you can use debt to be used in multiple places at the same time.

And I'm gonna talk to you about a scenario in which I did that. And I'll break that down in a second. The other side of this is looking at consumer debt. Okay? So the bad side. Or the bad uses of debt would be consumer debt. This is to essentially take on debt to feed your lifestyle. Let's say you decide, you know what?

My friends are going on this awesome vacation. It's gonna cost $5,000. I don't have $5,000, but I have a $5,000 credit limit. I'm gonna put it on my credit card and I'll pay it off later. That's an incredibly bad use of debt and a dangerous way of using debt because what if something happens? And you can't pay that back the way that you were hoping that you could.

I dunno. You have a car problem or your kid gets sick or something like that. Now you have this credit card debt that. 15 to 20% interest rates on it that compound monthly. And then eventually you're just trying to play ketchup on the interest that you own on, or you owe on this, not even the actual, the balance.

So that $5,000 can turn into $10,000 really fast. And this is where people get themselves into significant trouble. You do not want to take on consumer debt for lifestyle purposes, right? You don't take on consumer debt because you wanna go to some super nice dinner you can't afford, like these are pretty common sense things.

People do 'em all the time. Otherwise, we wouldn't be talking about it and people wouldn't be in debt up to their eyeballs. Most Americans. Are worth very little. If you look at their net worth, what they owe versus what they actually own, they're worth very little, in many cases, negative. And when, if you really, if you add in all student loans associated with that, the vast majority of you are probably worth negative.

If you have a hundred thousand dollars in student debt and you don't have a hundred thousand dollars in assets, in savings, in equity, in a property, you're basically worth. At that time, right? I've been there. I've been worth negative as well. It sucks. When we look at student debt, we go back over to the good use.

I actually think student debt. Is a good use of debt. And here's why I say that, because if you are a clinician, you went into debt to then gain a skillset to be able to work in a profession where you know, you could, you can make more money than if you were doing something else in, in most cases.

There's definitely examples where that's not the case where you could have no college degree whatsoever and do really well, but you've secured. At a minimum, a middle class sort of income with the debt that you took on. Now I wish student that, I wish the cost to get a physical therapy, doctorate or whatever your degree is.

If you're a chiropractor or a, a massage therapist or athletic trainer, whatever it is, the debt you took on. Can be vastly different between those clinic clinical positions. But even still, you're doing it for a specific job. You're not necessarily just, doing like general liberal art studies cuz you don't really know what else to do.

And taking on, let's say you have $40,000 in debt after your undergrad and you still don't know what you want to do and then you'll get a job doing so. That doesn't relate whatsoever to that degree, that probably isn't the best use of debt student debt versus a very specific career field that you're gonna go into.

So I think that's good use of debt. You just have to understand that's like the cost of admission for some of these jobs which are awesome. I think being a physical therapist is actually one of the best jobs you can have. One of the best careers you can have because it is personally very personally rewarding.

And you can definitely leverage. That advanced degree and the credibility associated with it. Don't forget that you have a lot of inherent credibility and trust because of the degree that you have. You can leverage that in a number of other ways to really increase your, your take home potential, your income potential, right?

So I would lump that into good debt. Now if we go back to the bad side, consumer debt is one thing. Speculation is another one that I think is actually very dangerous. And I know people that have done. And it has not worked out well. And in some cases it has worked out really well. And that's where you borrow money to then invest in a speculative asset that you don't have any control over, really.

That would be something like stocks or cryptocurrency. And, I own both of those things, but I don't borrow money to then buy those. These are just things that we buy with savings, with money with money that we invest anyway. And it's a portion of what we have in our investment allocation.

I definitely am not gonna go take a loan to then go buy more, whatever stock or whatever, crypto that you want, that's a bad idea. Even though you might kill it, you might also lose everything. And now you have this debt that you put into a speculative asset that I think is very risky.

So I think that's actually a bad idea because you have no control over what you're then leveraging that debt into. And you're probably not gonna have a very good loan and or fixed loan at that. You probably are, borrowing money in some other manner that's probably pretty sketchy.

And then, Looking at debt in terms of variable debt, right? So the people that I know that do this are people that are like flipping homes that are doing like, real estate projects where they're trying to do a quick turnaround and they'll take on typically what's called hard money lending.

And if they know what they're doing. This actually can be like a pretty great strategy, but if you don't know what you're doing, like you just watch H G T V and you think, oh, I'm gonna go flip this house, I'm gonna make a hundred thousand dollars. And then you borrow money from somebody at 12%, and then if you don't pay them back in six months, then it goes up to 15%.

And th these are real terms. This isn't I'm not making these up like this is people do hard money lending for anywhere between eight and like 20%, sometimes more. It's a great if, it's great if you're lending the money actually. Because the debt is secured by the asset you're lending it against.

So worst case scenario, they don't pay you back and you get their house that they're like partially flipped which is usually worth quite a bit more than what you've lent them. But if you do that and you're wrong and you miss, or this is why a lot of people got just crushed in the housing bubble.

2008, they had all this. High variable debt that they could not pay back because the market tanked and they went bankrupt, right? So these are, in my opinion, unless you know exactly what you're doing and you have a ton of experience and you don't take on much, you just use this for very limited amounts.

This is a very speculative challenging way to leverage debt that can really burn you. The biggest thing cuz many of, you're probably not trying to flip houses. The biggest thing on the top two, don't use debt that is on a credit card to fund your lifestyle and don't borrow money to then speculate in assets that you have no control over.

Because it can work out really poorly for you. So understanding these two is really important because if okay, I wanna stay away from these the consumer debt, the speculation debt, and then the variable debt that could. Significantly. And even recently, this is June of 2022.

Interest rates have gone up, I think over 2% in the last six months. It actually might be 3% at this point. That's a lot. Let's say you have a variable loan and you think you have a 2% interest rate and now it's a 5% interest rate. That can dramatically. How much you have to pay on whatever that loan amount is per month.

I have a friend that's in the commercial real estate here in Atlanta, and they do these big 80 to a hundred million projects. And this is really creating a problem for them right now because when they started these projects, the interest rates they were getting were very low. And now the interest rates are doubled or more from where they are from where they started.

And it's creating a real problem for them. You have to hurry to finish some of these projects to. Basically get to sell and get their payoff so that they can pay debt down. So it doesn't end up creating a cashflow problem for them. So these are very speculative things. These are things you have to be very careful with.

The things you wanna try to get are actually like fixed debt at low interest rate for as long as possible. Borrow money for as long as possible at the lowest interest rate that is fixed that you possibly can. Assets that are gonna increase your net worth or for things that you can arbitrage in other ways or to learn skills that can increase the ability for you to make money.

I think this is the other area that I'm actually a little more cavalier on because I prefer to have control over what I'm gonna do with the money that I'm borrow. This is why I don't like to borrow money to then put it in the stock market or in something like crypto, because I have no control over that.

But if I'm gonna borrow money to learn, let's say sales skills. I know directly that I can work on that, I can add that and implement that in my business, and that I can see an ROI because of my implementation and hard work from a skill that I didn't have, that when I do have it, it's gonna pay dividends for me for a very long time.

With investing in business skills, I'll give you a couple examples of what of what we've seen. So if if somebody, like for instance, we have this with people. We work with within the different programs we have, whether it's the Clinical Rainmaker Program or the Mastermind, they might decide, okay, I have a business.

I'm gonna open a business card and get 0% interest for the first year. I'm gonna pay for this, this mentorship, this program to learn these business skillsets. And as my income goes up, I'm gonna pay that down. And they have no interest over that year as they do. Pretty good strategy. I've done something similar, not with a 0% interest rate card.

I did this with just a business card that we had. I joined a on the spot, joined a mastermind. I had to pay $18,000. At the time to learn this. And it was a marketing mastermind, primarily content and digital marketing, which I knew nothing about. And I had a business our practice at the time that, was, it was doing pretty good.

It was, at the time, it was probably around like $300,000. A year in gross revenue. And as, as I, I joined this group, I paid for it on a credit card because we didn't have the cash flow for me to actually like, pay for it outright. And I had to pay in a lump sum. So I put it on our credit card and I, I paid it down over the following, I think it was five months.

So I did accrue a little bit of interest on it, but what I learned. In that training, what I learned in that that business course and mentorship that I went through was exponentially more valuable to me. And even to this day, I use many things that I learned in that, and if I hadn't, I never would've been able to get an r o i on this new skillset that I got.

So that $18,000 to date is probably generated me, I don't know, well over. Millions of dollars in revenue because of new business we've been able to acquire because of the skillset that I learned. So the r o ROI on that is insane. And I knew it was a skillset I didn't have, so I took a calculated risk on myself.

And I learned a skill, I implemented it within my own business. I have control over this. And that's a risk that I will take because I want control over the implementation of a skillset to be able to improve my my income potential. Some people will get a line of credit, this may be something that you want to do within your business.

So let's say, I would say line of credit and equipment loans, I lump in the same category in a lot of ways. We work with a lot of businesses that are expanding into standalone locations. We probably had, I don't know, 40 or 50 businesses last year go through expansions and buildouts for a standalone location coming out of a sublease office from, with within another provider or a gym or some other business where they had very low overhead.

They were growing quickly. They moved to a standalone location, built that out, had to get equipment for it. So a lot of them got a line of credit from their business, which is basically the bank giving you an opportunity to use a certain amount of money. And you're only paying interest on what you use.

So let's say you have a $20,000 line of credit, and that is gonna be variable, but typically it can be variable, but sometimes it can be fixed. Depends on how it's structured. More often than not it's gonna be variable, but it's way better than a credit card. Cuz the loan terms are gonna be far lower.

For instance, the line of credit that we had for our practice, the last time I used it was 5%. So it's 5%. Interest On the line of credit, it was like $40,000 line of credit. We used about half of that. To get some additional equipment that helped add some profit centers to our business.

Once we paid it back we had minimal interest that we paid on it, but we used it for a reason to then build out the business again that we have control over. This is the most important part. If control over that, you might be wrong by the way. Like you make, you might make the wrong decision. You might get a piece of equipment, you think it's gonna be awesome.

Nobody uses it. At least you can turn around and sell that to somebody else. And then now you're not paying the whole thing off cuz you squandered it on a vacation, that you couldn't afford. You're, you have an asset that then you can then sell to somebody else and recruit, release some of that money.

So lines of credit and equipment. Those are two pretty solid variations of debt. I would also put like business loans in this with the S B A the small business Association. The only negative to those, they're very tedious. They're very time consuming. To get those loans and versus an equipment loan or a line of credit is much faster cuz the equipment loan is technically backed by the equipment.

So if you default on it, they just take the equipment from you and then you may owe, some of the difference. There may be a personal guarantee, depends on the loan, but those two are really good uses for expanding the business, building the business. And then the last thing, like I said before, was acquiring skill sets that you don't, And if you're less than a million dollars in gross revenue in your business, the two most important skill sets that you need to acquire right now are gonna be sales and marketing.

Understanding how to get people in the door, understanding how to sell effectively, and for your team to be able to to sell effectively. Really, you have to learn these things yourself first. After you've done that sales marketing, you get better at that. Then you have to learn how to be a leader and replicate yourself.

They call it like productizing yourself, creating yourself in other people in the business as well as front desk and creating systems and operation manuals, operating processes that your team is then gonna follow so that it is repeatable business and not necessarily people just figuring it out on their own.

This is the only way to really. Scale through people is to have the right structure in place and hire the right people. That's the other big thing. Do you even know how to do that? Do you know how to compensate people? Do you know how to build their roles out? Do you know how to give them feedback?

Do you know how to mentor people and develop people so that they actually are functional people in your business over a long period of time? That's a skillset that very few people have unless they have had to go through that in some other way in somebody else's business. And even still, it's different because that's not your.

That's somebody else's money. So that would be step two. You got your sales and marketing step one. If you don't know that stuff, you need to gain those skills. You need to either learn them the hard way via absorbing information and trying it and seeing what works, and then iterating on that.

Or you need to hire somebody to. Teaches you exactly what to do to shortcut that which is what we do with a lot of people that we work with, like early on, our clinical rainmaker program, heavy sales and marketing, heavy sales and marketing very little operations. Our mastermind, our ongoing training with people, it's leadership, operations, hiring it's systems.

It's actually like building out the business so that you can remove yourself from it, have a sellable entity or a passive entity and grow that to, a couple million dollars a year. If that's your goal. Some people are totally cool to just be at half a million dollar business and they're like they're great to run.

They're very simple. They're very profitable. Other people want to have a 10 million business and sell it, it just depends on what their goals are. Either way, they gotta work on the backside of that, the operations, the systems, the hiring, and the leadership side of what you're gonna do in the business.

So these are two areas you're gonna have to acquire at some point, whether it's the hard way or whether it's, fast tracking it. Via hiring somebody like us or somebody else. Those are the areas that I like to actually use debt for business specific purposes. And again, I wanna try to get fixed terms for as long as I possibly can.

If I'm getting an equipment loan, I want fixed terms for 10 years, even though my goal might be pay this back faster, I don't wanna have to pay back pastor unless I am in a place to pay it back faster. If that makes sense. This is why. I'm actually more of a fan of 30 year mortgages than I am 15 year mortgages.

The reason why is if you wanna pay that down faster, you can if you have a 15 year mortgage, you have to pay a certain amount per month where you might be able to allocate that. Other places that are gonna be a better r o roi. And if you're in a really good cash position, you can pay your home off all at once.

So there's different ways to look at it. This is my approach, this is how I look at it. And this is what I wanna share with you guys. It's worked fairly well for me and a lot of the people that I work with that are mentors of mine now have dramatically changed the way that I look at debt.

And these people are, Multiple eight, nine figure net worth individuals that they just, are in a different place than I am. I'm not there. But this is the way that the mentors that I have look at this, which is, it was very interesting to me when I started looking at it.

Cause I was a very debt averse individual. I'm just not very, I'm very conservative when it comes to that, and I've definitely changed my views in some respects in terms of how I look at it. I'm not nearly as cavalier as some people that I know. But like you, I'm a clinician, I'm not a, I'm not a risky person.

I went, I got a very safe career job. And this is how I've found the middle ground of how I like to work, with the financial situation that we have in the us. The last thing I'm gonna show you is an example of arbitrage or effectively using debt in a specific scenario that actually is probably pretty applicable to business owner.

That, that would be listening to this. So if you're a clinician that owns a business, I'm gonna give you a really good example of something you can do and a different way to look at debt. Last year we decided to get a new vehicle. And the reason we did that is we had, we. SUV that was pretty old.

We're starting to have some problems with it. And so we decided, okay, we're gonna get, we're gonna get a new one. And as a business owner, and you definitely talk to your c p A about this because there's very specific guidelines around this, but you can buy a vehicle that is, that meets certain specifications and you can actually own it in the business as business equipment, right?

So business equipment, And commercial vehicles essentially is what these are considered. Have to weigh a certain amount, be able to tow a certain amount, but anyway if they qualify, which a lot of big SUVs do you can actually deduct that, not deduct it, but depreciate it almost entirely in the first year, in some cases, entirely in the first year, depending on the cost of the vehicle.

So we bought a vehicle, it was $50,000 and we financed. At 0.9% interest for seven years. Okay. And that's the longest term they would give me because it was like three, five, and seven. And so I was like, gimme the longest term possible cuz the interest rate didn't change whether it was three, five or seven, percent.

And it was a ne negligible difference in terms of the interest that we were gonna pay on that. So I said, dude, gimme as long as possible. No, no money down as gimme as much debt at 0.9% as I possibly could. That's pretty low, almost zero. So we have that seven years. It's $614 a month is what the payment is.

What the payment is. We could have paid for this in cash. We could have just said, okay, here's $50,000. We own this outright, which is what we pretty much have done with almost all the vehicles that we own. But instead we looked at, okay, where else, what else could we do with this $50,000?

And For me around the same time, I had an opportunity to invest in a real estate deal that had come my way. And the minimum investment amount on this was $50,000, which is the exact same amount that we paid for the vehicle. So the terms of this first of all, let me go back to the car.

Because we paid for this vehicle it's a $50,000 vehicle. Even though we didn't actually buy it outright, we financed it, we still get to depreciate and deduct that from our income in the business. So that $50,000 is basically a minus $50,000. To the business, which at the tax rate of about 30%, which is roughly where we, I dunno if that's where we're at.

This is the average of where people would be at that own a business of that size. That's a $15,000 savings on taxes. Do, that's not like a over a 70 year period, you get $15,000 off your taxes. That's year one. So year one, the year we bought the vehicle, we had to pay $15,000 less in taxes because we.

A $50,000 vehicle, but we didn't. Put $50,000 into it. We financed it, so we'd only had a few payments of $614 per month, but we had a $15,000 tax savings. So keep that in mind. I'm not telling you to go and get a vehicle for a tax savings, by the way, don't do it unless you need a vehicle. Keep the vehicle you have paid off for as long as you possibly can, but if you're in this situation, this is an example where you can get an immediate savings.

So if you really look at the math on this, that $50,000 vehicle really is $35,000 if we were to take that that full amount and put it towards what we owe on the vehicle. So that is one example of where you win. But what we did was we had this real estate opportunity. And this is what's called a syndication.

Not everybody can necessarily do this. You have to be what's called an accredited investor. It's unfair. I don't know why they do it this way. Cuz a lot of these are like very safe investments. But anyway, this is a real estate syndication that you know, an operator that I was referred to.

Runs. And basically what they do in this example, they're they buy an apartment complex that is older. They renovate it and then they are able to actually like increase rent because the apartments are renovated versus the rundown sort of apartment. Apartments that haven't been renovated in, let's call 20 years.

Then they're able to increase. To whatever the market rent is in the area. And that increases the cash flow of the asset the apartment complex, which increases the value of it. And eventually you can sell that or you can hold onto it and just cash flow or whatever. And so I invested what we would've paid cash down on the vehicle into this real estate investment.

And the terms of this were I liked quite a bit because there was what's called an 8% preferred return, meaning that I'm contractually guaranteed to have an 8% cash on cash return for my investment, that would be 8% of $50,000. Per year. And if they, let's say they're stabilizing it and they don't make it the first year, they have to catch up the following year.

They basically started outta the gate at 8%. So my $50,000 investment goes into this apartment complex with a number of other people so they can acquire a big asset, and I get $333 a month. At, I think it's like the sixth of the month that gets deposited in my account, and that's 8% of the money that I put down.

So 8% of $50,000. So instead of me taking that $50,000 and putting it in a car, I put it into something that now is generating me $333 per month, over half of what the actual cost the car is. So I'm taking the monthly. Distribution from real estate, and I'm putting it towards the car along with some other money.

But here's the other thing that's a sneaky thing to think about. Not only is that paying me 8%, $333 a month, but that is leveraged money. So now we go back to debt, right? So we go back here. This is fixed debt, so I'm here. Fixed debt to buy assets. These two things, I'm doing both of those with this investment.

So I have fixed debt. This is at I forget what it was, three and a half to 4% interest rates, something like that. The. But my $50,000 is at a loan to value of 25%, meaning that they are borrowing 75% of the cost of the building, and they're putting down 25%, which is fairly conservative. A lot.

Some people do far less than that, like 10, 20%. Like they're, they run really thin, aggressive margins. This one most of the ones that I'll do as far as real estate investments go, I'm looking at 20. 30 ish percent down. So that it, so that if it drops or the market tanks somewhat, have to be a massive tank for that to go underwater in terms of what you owe on it be very unlikely.

So it's very conservative to do that. You don't get, you don't get as crazy returns as you could do if you're leveraging even more. But the you dramatically decrease your downside risk. So this is 25% loan to value, meaning that you have to multiply what you invested by. Because 25% is what I put in.

So my $50,000 is actually $200,000 in the building because of the loan. It'd be like you putting down $25,000 on your house. Your house is worth a hundred thousand dollars, so you're taking a loan for $75,000. But if that house appreciates. By 6%, your a hundred thousand dollars has gone up $6,000, even though you've only put $25,000 in as a down payment for your property.

And this is what's happened with this property. So in the last year, so it's been right around 12 months that we've been in the in the deal, and they'll reassess these kinda on a quarterly basis based off of comparable properties and things like. This property because of some of the things they've done to improve the aesthetics of it and rehab these units to where they're nicer.

It's gone up about 6%. So 6% on my $200,000 worth of leveraged. Real estate ownership in this property is a $12,000 gain, so it's 6% appreciation times the $200,000 of leverage gain I have that's $12,000 or an additional thousand dollars per month in the last 12 months, but that has gone up. So my $50,000, if I'm adding all this up in year one, my $50,000, I would've put into a car to pay for it cash.

I got a $15,000 tax savings, year one, $12,000 in appreciation, and about $4,000 in cash flow that gets paid to me on a monthly basis for $31,000 in year one. So well over half of the cost of the vehicle. I actually recouped year one by actually putting this into a different asset. Financing the vehicle, which is frankly gonna go down in value anyway.

That's a depreciating asset. That's not a great asset to own. You just have to have a car, right? So that's it's something we need. So that's a difference in where you put that money. Plus that doesn't include the $333 I'm gonna get per month, as well as any appreciation in the property. That then we will get at the sale of that property or they hold onto it forever and it just keeps going up.

I'm fine with that too. Either one of those, so like for me to break even on this difference is gonna be probably two years. So within two years, I will have gained $50,000. Just by financing something that costs $50,000. And I'm in a significantly better spot because I have now used debt effectively by getting a 0.9% interest rate over extended period of time instead of buying that cash.

And for a lot of people, they hate having debt. I'm very similar to that. I really don't like having a car payment. I actually. Really don't like it. It actually helps me to do models like this cuz I'm not gonna pay this car off early. I normally, that's what I would do. I'd be like, I just can't stand this monthly payment.

I just pay it off. There's no reason for me to do that because this asset is paying for this vehicle, basically, if that makes sense. I basically invested money into a into an asset that is now paying me from that asset that then I can. Pay this vehicle off with, and I basically got a car for free, I guess is a good way to look at it.

So something for you to think about, if you're looking at debt, if you're looking at how you can like best leverage these things, it's very important to understand what you're getting yourself into. We go back. You got just a couple things that you have to remember. Number one, you're trying to get fixed debt for as long as you possibly can for assets, strong assets that are gonna be in good places that are going to grow over time.

Primarily for me, this is real estate and other businesses, especially other businesses, I can have some control over. Improve in some way or send business there in some way. Those are the two main things that, that I want. So if I take a loan to buy a business, let's say that business is making $200,000 and I can buy it for $200,000, but I can improve it in a way where I can start to get a hundred thousand dollars in income in just net income to myself the following year.

It only takes me two years after that to get rid of all of that debt and now I own it outright and have a hundred thousand dollars in an income stream associated with. Same thing with a building with real estate. Maybe it's the commercial building that you're looking to move into. Maybe it's a rental property down the street.

There's a lot of variables associated with that. But these are just examples of things that are good assets to get fixed up for. And then investing in your business. I'm a big fan of doing that. If you know you have a a weak link in your chain to be able to bolster that, to improve your own business, that's a great r o ROI on your money and your time.

Do not take on consumer debt to feed your lifestyle. Do not take on debt to speculate in assets that you have no control over whatsoever and are not backed by anything tangible. This is the big difference. I may have borrowed money for a car and then put it into real estate, but I can walk into that apartment complex.

I, I, it's a physical thing. It's something where people actually need to live. And worst case scenario, if we have to sell the asset, we sell the asset, we won't lose money. We'll, probably just at a minimum break, even if something terrible happens, you can't really. You can't really do that with, let's say this, your stocker whatever cryptocurrency you buy goes down 50 or 60%.

It may never recover. Maybe it doesn't. You may even a place where you have to sell at a huge loss that's speculation. Don't do it. It's just a bad idea. You only use money that you have that you've already paid taxes on to invest in, things like that. And then trying to stay away from variable debt, if you can.

Because interest rates can go up and down, wildly. Just like I was saying, my friend here that's a real estate developer in town they're very stressed about the increase in loan amounts in the debt percentage because it affects their business and their ability to pay that back.

Hopefully that makes sense. If you're listening to us on the podcast I definitely recommend go to the Facebook group, get signed up there. And you can watch this video training as well, but if not, hopefully, go back, listen to this. I would take some notes on this one. This is a very like challenging topic sometimes for people to wrap their head around.

If you're like, oh, what did you do with this vehicle? Go talk to your c p A, get a really good C p A that understands the tax code and allows you to really be able to use that, legally to your advantage. There's been a huge difference for us from the CPAs that I've worked with in the past.

We're in our third C p A right now, and he's so much better than the other ones that that I've worked with. So they, there's a difference. It's. There's a difference in clinicians. Like somebody could go to two people not getting any better. They come to see you. You're a ninja, and you get 'em better in a short period of time.

So you gotta understand that with other professionals. And then lastly, If you like this, share this with a friend, share this with somebody that you think this could help the easiest thing to do, you could message it to them, you could take a screenshot of it, throw it up on Instagram, tag pt bis in it.

We'd love to reshare that as well because I think this information is something that most people need to understand. They need to be empowered about how to make the right decisions financially, and it just comes down to the fact that. We need money to, pay for our livelihoods for pay, just to pay for life in general, to put ourself in a place where we're not constantly stressing about how we're gonna pay our bills.

And the more you understand these things, even though you may find it boring. It, the more you're gonna put yourself in a place where you can actually take care of yourself and your family and be present with them because you're not worried about money all the time. So I really do think this is something that is a concept that everybody needs to understand.

And you need to be able to apply this to your own lifestyle and understand okay, here's where he's talking about this or this, or maybe I shouldn't do that. Because it, I think this makes a huge difference. So take a screenshot, put it up on your Instagram stories, tag us in it. We'd love to see that.

And if you found this helpful, I would love it if you'd head to iTunes or Spotify, wherever you're listening to this, and leave us a review, an honest review of the podcast. That goes a long way, not necessarily for us, but for other people, finding what we're putting out there. So it really does help us help more people.

So those two things are the only ask I have for you for this. This is totally free for you and something that I frankly enjoy doing. I hope that this helps you and we plan to. Ongoing for a long time. We just hit a million downloads on the podcast two weeks ago. I didn't make a big deal of.

My wife was like, why would you not make a big deal? That's a hard thing to do. And honestly, I didn't even know. Our podcast producer just sent it to me randomly. And it just it's something that we are actually helping a lot of people, which is super cool to see. And the way that we can do more of that is by you sharing this with a friend and leaving a review.

So I would love if you do that, but as always, I just wanted to say thank you so much for listening and we'll keep doing these and we'll see you next.

What's up, PT Entrepreneurs? We have a new exciting challenge for you guys. It's our five day PT biz part-time to full-time challenge where we help you get crystal clear on how to actually go from a side hustle to a full-time clinic. Even if you haven't started yet. This is a great way to get yourself organized in preparation for eventually going full-time into your business.

So we actually help you get crystal clear on how much money you're actually gonna need. Replace with your business to be able to make a lateral transfer. How many people you're actually gonna need to see based on what you should be charging. We're gonna tell you three different strategies you can take to go from part-time to full-time, and you get to pick the one that seems like the best fit for you for your current situation.

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That's what this is all about. We want you to win. We want you to take action, and in order to do you have to get really clear on what you need to do next. So go to physical therapy biz.com/challenge. Get signed up for the challenge today. It's totally free. We think this is gonna be a game changer for you and are excited to go.

Hey, real quick before you go, I just wanna say thank you so much for listening to this podcast, and I would love it if you got involved in the conversation. So this is a one-way channel. I'd love to hear back from you. I'd love to get you into the group that we have formed on Facebook. Our PT Entrepreneurs Facebook group has about 4,000 clinicians in there that are literally changing the face of our.

Profession. I'd love for you to join the conversation, get connected with other clinicians all over the country.

I do live trainings in there with Yves Gege every single week, and we share resources that we don't share anywhere else outside of that group.So if you're serious about being a PT entrepreneur, a clinical rainmaker, head to that group. Get signed up. Go to facebook.com/groups/ptentrepreneur, or go to Facebook and just search for PT Entrepreneur. And we're gonna be the only group that pops up under that.