Bold TV Business presents the first edition of Q&A with host Philip Michael. Philip is a real estate entrepreneur and the founder of NYCE Companies, whose mission is to create 100,000 millennial millionaires by 2030. Phil’s goal is to give you sound advice on money and investing.
Q. How do you refinance student loans?
A. I was so privileged I was born in Denmark, so all my education was free. It’s a little foreign to me that someone would have to be burdened with [loans]. That said, there are many ways you can create equity. One of the things I’ve spoken about is real estate investing. You can create equity and refinance there; then, you could pay off [your loans]. You also can pay off credit cards. The most important thing is going back to the basics: budgeting, managing your spending, being committed to building wealth over time, saying I want to save this every month, I want to save this every year [and] I want to invest in this much. [Over time] you start to have that wealth-building mindset.
Q. How will pandemics affect loan rates going forward?
A. They already have affected loan rates. The [federal government has] lowered interest rates. They’re almost at European rates. In Europe, they’re at zero or negative interest rates. Here, it’s not quite the same conditions, but it is cheaper. If you look to buy a property, the interest rates that you’re getting right now are much sweeter than a year ago. [The federal government is] just trying to get some money into the economy and get things going, so, that’s really what it is.
Q. Should I be investing in Bitcoin or normal stocks?
A. I am not a financial advisor, so I’m not at liberty to tell you what to do with your money. I can only tell you what I would do. The thing about Bitcoin is that it sounds hot, sounds cool and it’s almost like cannabis. It’s one of those things where there’s potential. I, as a prudent investor, don’t like to invest in spec. I don’t like to invest in ideas; I like to invest in systems. Systems meaning, is there a pattern that can be predicted? If yes, then I’m making a sound decision. If I’m just guessing on something that’s potential, then I’m skating on thin ice here. The thing with Bitcoin is, number one it’s volatile. Two, is Bitcoin actually being used anywhere, and if so, what are we really doing? Number three, what I see as the argument for Bitcoin is that it’s the future of money. Well, if it really was the future of money, by the time it comes to be the present of money, who’s gonna adopt it first? The big banks? I just say stick to the systems, not the ideas. [I’m] not saying you shouldn’t put a little bit of your portfolio in Bitcoin if you’d like to roll that dice, but just stay smart, [and use] common sense, that would be my two cents. And that two cents can turn into two dollars if you just use it correctly.
Q. If I take out a loan to buy a property, I’m nervous about being under that much debt for a long time. Any thoughts?
A. [I have] many thoughts. Debt is like fire. Now fire can heat your house, can heat your food and can keep you safe. But, if you let the flames engulf you, you can burn everything to the ground. That, to me, falls in the category of consumer debt. If you have a lot of high-interest debt from credit cards, for instance, [then] you’re in big trouble. Let’s say you buy something for $100, but you’re paying 25% [interest]. [That’s] predatory interest rates on what you just bought. Did it ever occur to you why these banks are willing to give you points and give you money? Because they make way more money on the interest rates that they charge you.
Two, any billionaire you see probably more than 50% of their fortune in debt. And I’m probably being conservative here. The way to generate a billion-dollar fortune is what I call the billionaire blueprint, which is using debt intelligently, as leverage. For instance, when you buy a house [with a property value of] $100,000, [and] you put [a down payment of] $20,000, the bank is then giving you 80% [of the property value], which is $80,000. Right? Now the [property] value goes up to $200,000. You only have an $80,000 loan, but the $120,000 that’s left is equity, and that goes right to your net worth. Without that initial $80,000 [loan] from the bank, you wouldn’t have gotten the property in the first place. Do you see what I mean?
If any of the big funds raise a billion dollars, they leverage that billion dollars using debt. So that $1 billion now becomes $5 to $10 billion in purchasing power because the bank will finance the rest. They say, “Look, these boys got this cash. Let’s bring this to the equation.” Remember, banks aren’t into doing any favors. They’re just there to make sure they can make money on their money, and their business model is interest rates. So the banks actually can be really good partners for you if you just know how to use debt. So that’s what I would say. Don’t be too worried about long-term debt because it just means that you have the flexibility and predictability to use that financing intelligently to generate more wealth for yourself.
For more money and investing advice from Phil, check this out.