ZuoTi.Pro
Question

If you follow many of the financial gurus you will quickly hear about how we should...

If you follow many of the financial gurus you will quickly hear about how we should live debt free and maybe even cut up our credit cards. However, does this debt management advice apply to an investment portfolio? The question we are really asking here is about leverage. Should we strive to eliminate it or maximize it when creating our real estate portfolios?

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Rather that eliminating debt altogether, it makes more financial sense to maximize it. Taking debt to increase investment portfolio will yield higher returns since the debt taken will have a fixed cost but the returns from the investment/ real estate would be greater than this cost. However debt also increases risk of default and so should be taken in moderation.

With real estate there is a dual benefit of taking debt. The cash flows can start immediately in the form of rental income. This can be used to pay off the debt. Thus taking debt will help one to create a permanent asset which will also appreciate in value.

0 0
Add a comment
Know the answer?
Add Answer to:
If you follow many of the financial gurus you will quickly hear about how we should...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • when it comes to lending we often hear about the front end and back end ratio...

    when it comes to lending we often hear about the front end and back end ratio that lenders use for primary homes. However, the rule is not as clear in the investment space. With that said what do you think is the optimal debt level? 15%, 25%, or maybe 30%? Additionally, do you think that once equity builds up and the leverage reduces that we should re-finance to buy more so that we maintain our preferred debt level?

  • This week we study how consumers make decisions to maximize their benefit (most satisfaction, biggest "bang...

    This week we study how consumers make decisions to maximize their benefit (most satisfaction, biggest "bang for a buck"). But what if decisions are made for us as it is the case with gifts? Do gifts maximize our benefit? Is there more to gifts than just monetary value? Earlier this week, Waldfogel was at it again in a webcast for members of the media that was sponsored by the National Science Foundation. Here is just some of his math: Americans...

  • FISCAL POLICY IN THEORY: March, 2020: we are on the verge of Congress and the President...

    FISCAL POLICY IN THEORY: March, 2020: we are on the verge of Congress and the President passing legislation that will empower the federal government to spend an unprecedented amount of EXTRA money not seen since World War 2 ---- in order to address the pandemic but also to help cushion the blow financially of perhaps ten or twenty million Americans --- or more --- losing their jobs, and thus suffering a drop in income. The scale of the 2020 recession...

  • What alternative do you believe Mr. Markham should select? Offer your rationale for your selection. The...

    What alternative do you believe Mr. Markham should select? Offer your rationale for your selection. The Case This case was developed by the MIT Sloan School of Management. It is part of their “Learning Edge,” a free learning resource. This case was prepared by John Minahan and Cate Reavis. This case is based on actual events. Actual names are changed; some of the narrative is fictional. In early 2012, as he prepared to enter a meeting with the board of...

  • The classic book The 7 Habits of Highly Effective People by Stephen Covey has helped many...

    The classic book The 7 Habits of Highly Effective People by Stephen Covey has helped many business leaders work more effectively. One important principle taught by Covey is the willingness to delegate. Like many people, perhaps you think you can do the work better or more quickly than someone else. Yet delegation may be the best way for you to leverage your efforts. Covey notes that, by transferring authority to a properly trained and skilled person, you can focus on...

  • Please read the opening vignette about Community Medical Center in Missoula. How have they used lean...

    Please read the opening vignette about Community Medical Center in Missoula. How have they used lean management approaches to efficiently utilize resources (human resources and processes), eliminate waste, incorporate Total Quality Management, and also motivated the Respect for People I have uploaded the figures from 10.1 to 10.6 to give you more details. Please use them when explaining the question. Thank you! Orthopedic surgeon Doug Woolley was frustrated. A bottleneck in the recovery room at the Community Medical Center in...

  • Please read the opening vignette about Community Medical Center in Missoula. How have they used lean...

    Please read the opening vignette about Community Medical Center in Missoula. How have they used lean management approaches to efficiently utilize resources (human resources and processes), eliminate waste, incorporate Total Quality Management, and also motivated the Respect for People I have uploaded the figures from 10.1 to 10.6 to give you more details. Please use them when explaining the question. Thank you! Orthopedic surgeon Doug Woolley was frustrated. A bottleneck in the recovery room at the Community Medical Center in...

  • There was no question about Carl’s genius. Seven years ago he decided to enter the competitive...

    There was no question about Carl’s genius. Seven years ago he decided to enter the competitive nightmare that the personal computer business had become. Although on the surface that appeared to be a rather non-genius-like move, the genius came in the unique designs and features that he developed for his computer. He also figured a way to promise delivery in only two days for the local and regional market. Other computer makers also had rapid production and delivery, but they...

  • Learn to apply your ethical values using the Giving Voice to Value (GVV) method. There are...

    Learn to apply your ethical values using the Giving Voice to Value (GVV) method. There are multiple GVV documents in this Module. Review them all. You may do the exercises suggested in the documents but you do not have to post them in Canvas. You will learn how to factor your personal values into your ethical decisions from the method, you will still use the IDEA case analysis method when analyzing the GVV case, The Client Who Fell Through The...

  • Hi can you help me make a summary about this short article and how it affects...

    Hi can you help me make a summary about this short article and how it affects me economically as US citizen ? Supported by Federal Shutdown’s Uneven Toll: Some Americans Are Devastated, Others ObliviousFederal Shutdown’s Uneven Toll: Some Americans Are Devastated, Others Oblivious “It has been terrible,” said Andrea Caviedes, a furloughed loan processor in the Agriculture Department’s rural development program.CreditMichael B. Thomas for The New York Times Image “It has been terrible,” said Andrea Caviedes, a furloughed loan processor...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT