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It takes money to make money, although this is a true statement, who said it had to be your money. I want to start out with the basics. The most important thing to do is acquire trade-lines/credit cards, their one of the many forms of debt that can be acquired. This will help you build your credit history; which if used wisely will, establish a high fico score. A fico score is what financial institutions use to determine the risk of the borrower. The riskier the borrower the higher the interest rate. Debt is a powerful tool to wealth because it allows you to do a lot with little capital, this is described as leverage. For Example a 50 unit apartment complex can be purchased for 2,400,000 depending on the area. A 100% commercial loan is acquired at 10% interest per year(Even though it is almost impossible to get 100% financing on a commercial property, let's assume It's possible for the sake of the model). The monthly payment on this loan will be $20,000 a month. This complex will be used exclusively for retired senior citizens so the government will help keep the occupancy at a high level. Each unit rents out for $1,000 a month, and only 90% are occupied. This comes to 40 occupied units at 1,000 a month for a total of 40,000 dollars a month of rental income. The debt is $2,400,000 the payment on that debt is $20,000 a month. The total rental income is $40,000 a month, so you subtract $20,000 from 40,000 and you get $20,000. Now there are taxes and insurance and the cost of maintaining the property that have to be taken into consideration. For the sake of clean numbers let's allocate $10,000 a month to all expenses imaginable. This leaves the Landlord with $120,000 a year of income. If he uses a good management company he doesn't have to allocate much time to his investment, now he has the time to increase his portfolio. This was all possible thanks to the power of debt.

Learn more about this author, Antonio Salgado.
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