Christian OsgoodCEO, Multifamily Strategy · CEO at Multifamily Strategy

Borrowing at 18%??!?

13 Sept 2022 · 1 min

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0:44

Christian Osgood explains when borrowing at 18% makes sense in real estate. If the property's cash-on-cash return is much higher, like 30%, the expensive debt works. He borrowed at 18% on a zero-down deal and still made $500,000 in profit.

Chapters

You're raising debt and say it's one of those high interest rate deals. The most important piece is that your cash flow is so much higher than the actual debt. So sometimes, like Cody, you've borrowed— what's the highest interest rate you've borrowed at personally? 18%. Don't do that. Oh, don't do that. However, what was the yield on that deal? I made about half a million dollars. Epic deal, made money. That means there was a spread there between what he was borrowing and what he was making on the property. When you're doing this, especially when you get started, you want to make sure that you're watching the cash flow. So if you find that the deal is cash flowing, the cash on cash return ends up being 30%, would you borrow at 18% to make 30%? On a zero down deal, that doesn't sound as expensive, does it?