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Updated almost 6 years ago on . Most recent reply

User Stats

37
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13
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Dean Attali
  • Rental Property Investor
  • Toronto
13
Votes |
37
Posts

Investing with a syndicator using low-interest Line of Credit

Dean Attali
  • Rental Property Investor
  • Toronto
Posted

I currently invest with a syndicator using my own money, and I'm getting 8% per year back through it, with the hope of getting much more in a few years down the line with the property is sold.

I also have access to a 4% line of credit through my bank. My question is - is it a bad idea to do another similar investment, with an 8% return, if I can get a 4% loan? It essentially means I can get a 4% return on whatever the line of credit is, without costing me anything. I understand the risk of if the deal goes south, then I will have to pay back the LOC plus 4% interest, so in the worst case scenario I lose 4%. But are there any good to not do this?

Most Popular Reply

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764
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951
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Ivan Barratt
  • Investor
  • Indianapolis, IN
951
Votes |
764
Posts
Ivan Barratt
  • Investor
  • Indianapolis, IN
Replied

@Dean Attali this strategy has "brought down the house" throughout history.

The saying goes, "Don't borrow short and invest long." 

Read: Long Term Capital Management and The 2008 housing crisis as two great examples when values dropped and short term raised increased.

  • Ivan Barratt

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