Debt Financing

Pros and Cons

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Using Debt to Finance Real Estate Investing

One of the biggest “return boosters” in real estate investing is the use of debt. But with those benefits come some risks that you should consider. Here are some pros and cons of debt financing. 

Pros:

  • Greeting increased return on cash;

  • Immediate access to capital;

  • No dilution of ownership or control;

  • Possibility of tax deduction for interest payments;

Cons:

  • Delays can destroy profits or create losses;

  • Obligation to repay plus interest;

  • Default, damage to creditworthiness;

In general we recommend decreasing or eliminating your debt exposure when

  1. You are not in full control of the project;

  2. There are “unknowns” that could delay completion;

  3. You lack experience with this type of asset or process.