Investor tip: How to be comfortable with debt

Many people often think twice about starting a property investment journey for fear of acquiring too much debt before they begin to reap the benefits of their hard work, but according to property investor John Martinovic there are ways to feel comfortable with debt—all it takes is good education and the right financial team.

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John and his wife started their business of creating wealth through property in their mid-30s and has since acquired different types of assets, including small- and large-scale units, National Rental Affordability Scheme (NRAS) properties, and off-the-plan apartments. Throughout their journey, the couple has learned to differentiate good debt and bad debt to help them manage their property portfolio better.

“Not everyone's comfortable with debt… but I think of it as good debt and bad debt. Providing it’s good debt, I'm not too phased. I've always said the bank will lend you money for a property, but they won't lend you money to buy shares, so what does that tell you? It's a fairly safe gamble,” John said. 

“Provided you’re not overcapitalising, [and] you're not stretching yourself too much, you've got a buffer there, you got backup plans—that's what I think [is] one of the keys.”

John and his wife’s view on debt started off being similar to most people’s, inspired by their upbringing and the way their parents handled their finances—that is, “when you have that dollar, that's when you go spend it”. 


However, beginning a new life as property investors have opened their minds a little more and changed their general perception towards debt and money.

“We're seeing now that you can't save enough to be able to… either buy property or invest in a property. It's just very hard in terms of growth that markets are going into. So you hear a lot more owners saying, ‘I wish we did what you guys are doing today, you know. Utilising other people’s money to grow your own wealth,’” according to John.

Knowing this concept of leverage and how to make the best out of it takes continuous education on markets and finances as well as good guidance from the right people, said Smart Property Investment’s Phil Tarrant.

For John and his wife, it only took some self-education and establishing a good relationship with a property accountant to set them up for success.

“We knew nothing, had very little money to our names, didn't even have money for a 10 per cent deposit at the time, John said.

So we learned all about [leverage], we secured that, and then our accountant... went further into how to leverage and how to grow from there. We have been coached by our accountant, he's certainly been one of the keys to getting us to where we are today.”

The couple’s advice to budding property investors is to try and seek out the best ways to learn the things you need to know and to never be afraid to ask for help.

“You do have to line yourself up with people that are on your side, and that understand you and your position in life, and where you are and that understand that market,” he said.

Phil concluded: “You don't know what you don't know, but as soon as you start… immersing yourself—it is one of the keys to success in this game. Be confident, be educated. One thing you can control is your knowledge of the marketplace… and what you choose to do about it.”

Tune in to John Martinovic’s episode on The Smart Property Investment Show to know more about why he decided to be “pedantic” about his property portfolio and why he believes that keeping on top of his finances now will not only safeguard the future of his children but enable him and his wife to be debt-free by 45.


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