Let’s talk about debt. We get questions all the time about whether or not you should take on debt in order to purchase rental real estate. The real answer is: maybe.
One mantra that has stuck with me throughout the years is the idea that “free and clear is the promised land.” Obviously, if you can purchase a property without a financial product, you forego interest rates, fees, and other expenses.
However, using cash up front for every single deal isn’t always an option. You’ve heard it here before: finances are not one-size-fits all. Luckily, there are many alternatives if you’re willing to be creative. And there are ways to pay with cash, even if you don’t have $50,000 sitting in a savings account.
You can take a 401k loan, take out a HELOC, partner with other investors, or structure private notes. Wholesaling is another great option. Business credit cards may be available to you. Traditional mortgages, or refinances are options as well.
It all comes down to evaluating these products, as well as taking inventory of your current debt situation. You have to assess financial products, and determine if they are worth it to help you meet your goals. Natali likens it to shopping for apples. If you’re looking for a piece of fruit, you would try to get the best product for the best price. Financial products are no different.
Remember, interest is paying money for money, so you want to get the best deal possible. Simply think of these loans as products, and decide if it works for your individual situation. It’s not right or wrong to utilize debt to reach your goals, just make sure you’re empowered in your knowledge about financial products, and make the best decision possible for you and your family.
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