Day 5 of The 14-day Passive Income Challenge - Healthy vs unhealthy Leverage - Chaim Ekstein

welcome to day five of the 14 day passive  income challenge i'm super excited that you're   still with us and let's jump right into that  today is the second day that we're discussing   the L from the ALM model which is Attract  Leverage Manage today we're going to discuss   the second strategy in the Leverage model which  is healthy leverage versus unhealthy leverage   please let me know below in the comment section if  you have any experience with that or if you have   any other ideas that we can all benefit from and  yes i'm reminding you i'm reading every comment   and i reply to every comment so let's have the  conversation down below subscribe underneath   this video to get updates on all our Passive  Income strategy videos let's jump right into it   a lot of times when we talk about leverage  people get afraid what are you telling me Chaim?   you are telling me to take a mortgage i don't need  a mortgage i don't need to take a business loan i   don't need to take credit well maybe you're  right maybe you're not right i don't know   depends on your situation but let's have  a general discussion about leverage you   know what i'm going to illustrate it on the  ipad you have two people owning a home and   just for illustration purposes i'm gonna say  the home is worth a hundred thousand dollars   both homes are worth a hundred thousand  dollars the only difference between the   two homes is this home is free and clear meaning  no mortgage on it and this home has a mortgage of   let's make this red a mortgage for one hundred  thousand dollars which of these two people person a person b which of these two people are  in a better situation of course most people would   say that A is in a much better situation because  he has no mortgage so he has no mortgage payment   versus person b has a mortgage so he still has  to make a mortgage payment but what i didn't   tell you is that if i want to compare the two that  means that person b also has an account somewhere   with a hundred thousand dollars in the account  so right now even though person a is in a better   situation when it comes to the home because he  has a hundred thousand dollars Home free and clear   versus person b has a hundred thousand dollar  home with a hundred thousand dollar mortgage but   if you look at it person b has one other thing in  place he has a hundred thousand dollar in a bank   account which if he wants he can with one click of  a button make a transfer and pay off his 100 000   mortgage so now who's in a better situation of  course you're going to tell me still person a   because why person a doesn't have to make  a mortgage payment every day every month   versus person b has to make a mortgage  payment every month yes you're right   but what about if the mortgage cost  for person b is let's say three percent   and the account that he has in this place earns  them three percent isn't he in the same situation   he pays three percent for the bank and he receives  three percent on his hundred thousand dollars   oh now could be there in the same situation but  what about if person b earns not three percent but now we're gonna make him earn four percent   doesn't this put him in an even better situation  because now he pays three percent for the bank and   he earns four percent where he has the money  invested now i can go on and on what about   if you earn 10 percent and he pays three percent  that's what's called arbitrage so in other words arbitrage is the difference between how much you  pay for money and how much you receive for money   and this specific example the arbitrage  is plus one percent if this is instead of four percent if this is ten  percent then the arbitrage is   seven percent plus okay this is how successful  people look at leverage and of course they're   healthy leverage and there is unhealthy  leverage let's discuss the difference between   healthy leverage on unhealthy leverage healthy  leverage usually will give you a tax benefit   usually we'll add a reasonable rate of interest  you're not going to pay like crazy interest rates   typical example would be a mortgage on your home  you're going to pay three percent three and a half   percent at the time of the recording of this video  typically a healthy leverage plan would include   what you're going to do with the funds that you  take out from your mortgage with the money that   you that you take a loan for what are you gonna  do with it that will give you a better return   than what you're gonna pay for the interest  for the financial institution or for whatever   where you're gonna pay the interest you should  think in your situation what is a healthy leverage   for you and what is the unhealthy leverage for  you just not to take a loan is not the solution   you have to think about it in the big picture how  can this improve your passive income plan and then   you can make a decision i would love to hear from  you how you take advantage of healthy leverage   and how you stay away from unhealthy leverage in  the comment section below and yes as i told you   i read every comment i reply to every comment and  i'm looking forward to having this conversation   with you in the bottom in the comment section  about your passive income strategy and as   always if you want to get all updates from the  Passive income strategies videos that we're doing   make sure you subscribe to the  channel and you have no video left out