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Originally Posted by Cynthetiq
can you elaborate on that concept? I'm coming up short when reading it.
I bought a property with a 30 year mortgage. I rent it for a little more than it costs me in expenses. Is that what you are referring to in making money of other people's debt?
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Not exactly. Rent isn't debt; it's an expense. Even though you are making a net profit on your real estate, the bank (or other lender) is making money on your debt--the mortgage--through the interest expense you must pay on it.
Here's a comparison of what I mean:
Person A: Has a credit card balance of $1,000.
Person B: Has a government-issued bond worth $1,000, such as a Canada Savings Bond.
Person A is paying interest expense to the credit card company.
Person B is earning interest from the government.
The credit card company is earning an income on Person A's debt.
Person B is earning an income on the government's debt.
I want to be more like Person B, but, for now, I'm Person A.