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Updated on
March 16, 2024


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To borrow money with the intention of repaying it in full plus interest within a specific period of time.

Debt is an important tool in real estate investing, as it allows investors to leverage their capital to acquire properties that may otherwise be beyond their financial means. Debt can be used to finance the purchase of a property, as well as to fund renovations, repairs, and other improvements to the property.

Several types of debt can be used in real estate investing, including mortgage loans, home equity loans, and lines of credit. Each type of debt has its terms, interest rates, and fees, and it is important for investors to carefully consider the options available to them before taking on debt.

One of the main benefits of using debt in real estate investing is the ability to leverage capital. By taking on debt, investors can acquire properties that may be beyond their financial means if they were to pay cash. This can allow investors to generate higher returns on their investments, as the value of the property may increase faster than the cost of the debt.

However, it is important for investors to carefully consider the risks of taking on debt. If the value of the property does not increase as expected, or if the investor is unable to generate sufficient income from the property to cover the debt payments, the investor may be at risk of default. In this case, the lender may foreclose on the property, resulting in the investor losing their investment.

It is also important for investors to consider the impact of debt on their overall financial position. While debt can be a useful tool for acquiring properties, it can also increase the investor's financial obligations and may impact their ability to take on additional investments in the future.

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