Cheap debt feels like a superpower. It also quietly rewires decision-making in ways most borrowers do not notice until the cost of money changes.

When capital is inexpensive, deals that should have been declined start to look acceptable. Margins that should have been thicker get thinner. Hold periods that should have been flexible get locked into aggressive assumptions. The math still works on paper. The margin for error shrinks.

I watched this play out in real time during the low-rate years. Competent investors began stretching for properties they would have passed on at higher rates. The justification was always the same: the financing made it work. When rates rose, many of those same deals became awkward or worse. The properties had not changed. The cost of the debt had.

Cheap debt also encourages leverage for its own sake. The question shifts from “Does this property produce a sensible return on the capital I am putting at risk?” to “How much can I borrow against this?” Those are different questions. The second one has a way of producing larger portfolios that are more fragile than they appear.

None of this is an argument against using debt. Leverage is one of the tools that makes real estate capable of building wealth faster than unlevered saving. It is an argument against letting the cost of debt become the primary reason a deal gets approved. The property still has to make sense if the financing becomes less friendly.

A useful discipline is to underwrite every deal at a higher interest rate than the one you currently expect to receive. If the numbers still work, you have margin. If they only work at the cheap rate, you are not buying a property. You are buying a set of interest-rate assumptions.

Strange behavior is not a moral failing. It is what happens when the cost of capital temporarily stops enforcing discipline. The market eventually reintroduces the discipline. The investors who kept their own standards through the cheap-money period are the ones still standing cleanly when that happens.

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