Popular finance advice often says to get out of debt. That message helps people who struggle with consumer loans, but it ignores a key truth. Debt can be one of the most powerful tools for building wealth when you use it correctly. The first step is understanding the difference between good debt and bad debt.
Good Debt vs. Bad Debt
Bad debt takes money out of your pocket. Think about financing a $100,000 car. It loses value the moment you drive it off the lot. The same idea applies to a brand-new TV that will not hold resale value. These are depreciating assets. They reduce your net worth and usually raise your monthly burden.
Good debt helps you buy assets that produce income or appreciate in value. A rental property is the classic example. Tenants cover the mortgage and operating costs. You own the asset, collect cash flow, and build equity over time. Ask one question before you borrow. Who is paying it back? If you are, it is likely bad. If the asset and its income pay it back, it can be good.
A primary residence can also be good debt if it grows your net worth and fits your monthly budget. Many families retire with most of their wealth tied up in the home that appreciated over decades.
The Gray Area: Education Debt
Some debt is situational. Student loans can be good if the degree leads to high income and strong career options. They can be bad if you borrow heavily for a low paying field. The same logic applies to trade schools, certifications, and online programs. What matters is the cost compared to the payoff. If the training quickly pays for itself, the debt was a smart move.
How Investors Use Other People’s Money
Banks collect deposits and lend that money at higher rates. Investors use the same system, but from the other side. They borrow to buy assets that produce more than the cost of the loan. You do not need to start with a fortune. You need a deal that earns enough to pay everyone back and still leave a profit. When you have that, lenders want to fund it and investors want to join it.
Inflation and the Power of Leverage
Inflation can work in your favor when you hold fixed-rate debt tied to real assets. Imagine a $500,000 property bought with 20 percent down. If inflation averages 3 percent, the property value rises while your mortgage payment stays the same. Your $100,000 down payment benefits from appreciation on the full $500,000, not just the cash you put in. Tenants cover the debt service, and you keep the spread. That is the compounding effect of smart leverage.
The United States offers another advantage. The 30 year fixed-rate mortgage gives investors predictable payments for a very long time. Rents and values can rise with inflation, yet debt service remains constant. That stability is a huge reason real estate has created wealth for so many people.
Why Real Estate Offers Control and Stability
Real estate gives you levers that stocks and crypto do not. If the market softens, you can adjust expenses, add amenities, improve management, or offer short-term incentives to retain tenants. You can focus on cash flow and ride out price swings. With a stock, your only real lever is to buy or sell. Property owners have more paths to protect and grow their income.
Building Generational Wealth
Real estate is a long game. Over time you can grow equity, take advantage of inflation, and create steady income that lasts. With proper estate planning, properties can pass to the next generation in a tax efficient way. The result is a portfolio that supports your family for decades.
Bottom line: Debt is not the enemy. Misused debt is. Learn to distinguish between liabilities that drain you and assets that pay you. Then use good debt to acquire income producing property, protect your cash flow, and let time and inflation work for you.
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Inside KenPro, I teach the frameworks, strategies, and real-world lessons I wish I had when I began. If you are serious about building wealth, ownership, and long-term independence through real estate, this is where your journey begins.
