Editor: Crass Cash
There are different types of fat and different amounts that you need of both. The same goes for debt, different types and different amounts. My dad always told me growing up, "Not all debt is bad son." I go back and forth on this issue, but I think where I ultimately end up is that some kinds of debt are ok, if you use them conservatively and correctly.
Bad Debt: credit card, auto loans
Bad Fat: animal fat, dairy fat, trans fat
Good Debt: mortgages, student loans
Good Fat: poly and mono unsaturated, fat that comes from nuts, avocados, coconuts
Under no circumstances should you have credit card debt or an auto loan. I made the mistake of having an auto loan right out college and I paid it off in 9 months. Never again! I should have continued to drive my vehicle until I had the money to pay cash for the other vehicle. The depreciation alone cost me more than the gas I saved with the new vehicle.
Mortgages and student loans are ok, but they need to be used within reason. Student loans are ok, but do all you can to minimize them. Go to a public university. Major is something where you can get hired after you graduate. Graduating from Harvard with a philiosophy degree and $100k in student loans is a road to poverty. Graduating from a public university with a degree in education, mathematics, engineering, technology, accounting, geology, etc. is a much more lucrative endeavor.
Same thing with mortgages. Even Dave Ramsey says that taking out a mortgage is ok! But there are stipulations. You need to take out a 15 year fixed mortgage with 25% down. Dave would disagree with this, but I would also say that this is a good plan for rental properties. He wants you to pay all cash, but if you but it under the right conditions you will almost always be fine.
Always put down enough money so that you are cash flow positive with very conservative numbers. Even then you also need to make sure that if rent drops by 10% then you will still be cash flow positive. Even in Orlando, one of the hardest hit areas for real estate, rent rolls only dropped by 10% for the average residential home. Also make sure to have an emergency fund for the properties. I would also limit the number of properties that you have with mortgages. The Feds only allow for 4, which is probably a good plan. When you get to 4 you need to pay one of them off before you move on to the next one.
Having extremely positive cash flow properties can be a real lifesaver in bad times.