Debt or Equity for Seed Capital

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A friend of mine and I were having a debate about whether it was better to use debt or equity for seed capital for real estate. I thought it would be a great debate to have on the forums. Feel free to share your thoughts and ideas.

[Jeff V.]

Depends on the deal... and your goals.

For example, if your goal is to maximize cashflow and all variables were the same then I would choose the equity deal because it produces more cashflow.

However if your goal is to achieve a higher Cash on Cash return then the debt deal may be better if you are positively leveraged.

Then there is the case where your cash on hand is limited, but you have equity in another property that you can leverage.  Then, debt could carry you through getting the deal done and adding a unit to your portfolio where cash would not in this case.

Again, all depends on the deal being profitable first and foremost and then it must align with your current goals.

Hope this helps.

Jeff V