Should you borrow money to make an investment?
Today’s interest rates are incredibly low. To boot, inflation seems to be rising. Borrowing money at low rates to invest in assets that can appreciate can help create wealth. However, it brings about additional risks.
Often, the answer to the question is based on cash flow of the borrower. If you have steady, reliable cash flow from multiple sources, borrowing to make a new investment can be a smart risk. We recommend this often when making investments in income producing real estate – why use your own capital as a down payment if the bank will lend it to you at less than 4%?
In order to make a thoughtful decision, you should run through various positive and negative scenarios to see if you can tolerate the downside to get you the chance at the upside. We do this on behalf of our clients all the time.
If you aren’t sure whether to borrow money to make an investment, reach out to AskFreedom@FreedomFamilyOffice.com.