Level of gearing

From: Apprentice Millionaire

Hi all!

I have just finished reading John McGrath's book entitled "You don't have to be born brilliant". Some interesting things, others not so interesting.

At the end of his book (on pages 201 and 202 to be precise), he writes:
"For most of us, borrowing is an unfortunate necessity when buying a property. We have to do it, but we ought to keep it to a minimum. There is a simple principle to follow: borrow as little as you need to advance yourself financially. If you can make the purchase by borrowing 70 per cent instead of 80 per cent of the price, borrow the 70 per cent"

Am I naive, or am I right in thinking that this "youngest and most successful businessman" (that's on the back cover of the book) preaches to do what he says but not what he does? Why should I lock up my funds, slowing my progress towards wealth creation?

P.S.: I know some of the readers of this forum do not hold this gentleman in high esteem. Or at least his company...

Apprentice Millionaire
(Jacques for those who want to know me by a name)
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Reply: 1
From: Steve Navra

Hi AP,

With the correct structure, you will NOT be 'locking' up your funds, irrespective of how large a percentage you 'house' in the property! (This equity value can be used to create further serviceability, cash flow etc)

Email me direct, and I will provide more detail, if you are interested.


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Reply: 1.1
From: Sergey Golovin

Yes, I guess it is two schools of thought on that topic.
You borrow it - you have to share the profit with others.
You do not borrow it (money) - you keep to your self (the profit).
How much can one tolerate presence of others in business?
Is it $61 dollar question or $61,000?
Yes, dilemma.
I guess we have to look at fundamentals, and they are - do you start from the bottom and up like my self or did you inherited it all (the wealth)?
If you have started with nothing you might have to share it. This is what they are calling a team play. And if you’ve got lamp sump up front do you have to share it around?
Did someone say altruism? ……
Banks do have altruism as well – it cost you about 6-7% a year or could be more.
I do not know. I am still looking for answers.
Serge G.

P.S. May be someone can adopt us? Like Parkes family…
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