Why I Started Using Debt to Build Wealth (And Why You Should Think About It Too)

You’ve heard it your whole life. Don’t borrow money. Debt is bad. If you can’t afford it, don’t buy it. And for a lot of things, that advice is totally fine. Credit card debt from overspending isn’t something anyone should be proud of.

But that same thinking almost talked me out of one of the best financial moves I’ve made. Using debt to build wealth sounds scary when you’ve been taught that owing money is the enemy. But once I actually ran the numbers on my first rental property, I couldn’t unsee it.

You’ve Probably Noticed That Wealthy People Borrow A Lot

Have you ever noticed that the wealthiest people and biggest companies still carry massive loans? That used to confuse me. If you already have money, why would you borrow more?

Because they’re not thinking about the debt. They’re thinking about what the money is going to do after they have it.

If you can borrow money at one rate and put it to work earning a higher rate, you come out ahead. Using debt to build wealth isn’t some loophole that only corporations get access to. It’s just math. We were never really taught to look at it that way.

Here’s The Question Worth Asking First

If you borrow money, pay it all back with interest, and still walk away with more than you started with, was borrowing a bad idea?

Most people’s gut still says yes. Because we owe someone. Because what if something goes wrong. I felt exactly the same way. But that reaction is emotional, not mathematical. And I had to learn that the hard way by almost talking myself out of something that ended up working really well.

Here’s What It Actually Looked Like For Us

A few years ago I bought a rental property out of state for $100k. I put $20k down and borrowed $80k. Then put another $10k into repairs, so $30k total out of pocket for a property worth $120k after the work was done.

Then I ran the numbers. Multiple times actually.

Rent came in around $1,100 a month. And I didn’t just subtract the mortgage and call it good. I built in a vacancy rate of 10% even though the typical vacancy rate is only 5-8%. I added a maintenance reserve. I factored in utilities even though I wasn’t planning to pay them, just as a buffer for vacancy periods. Then I added extra on top of that just in case.

After all of that? Still $100 a month positive.

That’s not a huge number but that’s $100 after stress testing every expense I could think of at the most conservative rates I could come up with. The actual number in practice was better. The spreadsheet was showing me the floor, not the ceiling.

And I still almost didn’t do it.

The Fear Is Real Even When The Numbers Aren’t Scary

Here’s the part that doesn’t get talked about enough. Using debt to build wealth sounds great on paper. But when you’re actually sitting there about to sign for a loan on a property that isn’t your primary home, in a state you don’t live in, for a big chunk of money you can’t just immediately pay back if something goes sideways, it feels very different.

The spreadsheet said yes. My gut said are you sure about this.

What got me over it was trusting the work I had already done. I had run those numbers so many times with so many conservative assumptions that I knew if I was wrong it was going to be by a small margin, not a catastrophic one. At some point you have to decide whether you trust the work or not. So we did it.

Finding The Right Team Made A Huge Difference

The out of state part was its own layer of scary. Even if something went wrong, we couldn’t just drive over and handle it ourselves. We were completely dependent on a property management company we had just met.

We did a lot of research to find ours. Most companies sent a written report for move-in and move-out. The one we chose did video walkthroughs on top of the written report. They got on video calls with us before we even put in an offer. They answered every question we had.

That made a huge difference when you’re putting real money into something you can’t physically see. It didn’t erase the risk but it made the whole thing feel a lot less like a leap in the dark.

A Year Later We Did It Again

We didn’t stop at one property. About a year after the first one we did it again. Another loan. Another out of state property. Another round of running the numbers until they made sense.

The second time wasn’t fearless but it was different. Because I had already watched the first one work. I had seen using debt to build wealth actually play out in real life, not just on a spreadsheet. After the first one worked, that voice in my head had a lot less to say.

That’s kind of the whole point. The math doesn’t change between the first time and the second time. What changes is that you’ve proven to yourself it works.

But There’s A Line

This isn’t a post telling you to go borrow money for everything. Because there’s a version of using debt to build wealth that goes very wrong.

Taking out a loan to throw into a stock you heard about, or borrowing to put into something you can’t fully explain or run the numbers on, that’s not strategic. That’s borrowing to gamble. And those are very different things.

Rental properties work as a vehicle for using debt to build wealth because the income is real, the expenses are knowable, and you can stress test everything before you ever sign anything. The math has to actually hold up on its own. You’re not hoping it goes up. You’re running numbers on something that already has a logical reason to work.

We’ll get into the investing versus gambling line more in another post. But the short version is that borrowed money should go toward things you can actually model, not things you’re crossing your fingers on.

How I Learned To See It Differently

Debt isn’t good or bad on its own. It depends entirely on what the debt is doing after you have it.

A mortgage on a property that cash flows after every expense is using debt to build wealth. A loan on something with no income, no plan, and no math behind it is just owing money with hope attached.

You don’t have to already have everything figured out or have a ton of capital sitting around to start. I didn’t. I borrowed $80k on a $100k property, stress tested every number I could think of at conservative rates, and decided to trust the spreadsheet. Then did it again a year later.

The voice that says owing money is always dangerous is trying to protect you. But sometimes it’s also the thing standing between you and actually starting. Using debt to build wealth isn’t about being reckless. It’s about knowing your numbers well enough that the math does the talking.

P.S. Check out other posts on Rental Properties or Sidekick’s Corner.