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Updated about 1 year ago on . Most recent reply
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Why real estate investors use debt!
👉 Debt to buy assets is completely different from credit card debt (bad debt).
Leverage (when used correctly) is a powerful way to build wealth.
Here's how:
1. We buy an apartment complex.
2. The bank contributes 70%.
3. We keep 100% of the profits.
Sure, we still have to pay the mortgage and interest, but real estate investors don’t have to split the cash flow or profits with the bank.
This is the power of leverage.
We partner with the bank to buy a cash flowing business, and we get all of the upside.
Not a bad deal!
I'm taking on more debt in 2024! It sounds weird to say this, but it's true 😎
Are you using debt to build your real estate portfolio and create wealth?
Most Popular Reply
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Debt used to purchase real estate is a powerful tool. However, no differently than any other type of debt it must be used responsibly. There are a lot of investors who are bringing money to the table to refinance properties right now at rates that are 2 or 3 times the rates of the mortgages that are coming due. There are also plenty of investors who are getting crushed by pref equity which is effectively a form of debt given its senior position to the GP's equity that cannot be paid back due to the constrained financing market. It's important to point out the risks if not used responsibly.