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What Is The Difference Between Good Debt Vs Bad Debt In Real Estate?

The federal reserve recently announced one of the largest interest rate hikes in decades. This sent shockwaves through the stock market as many individuals who were investing in the late 90’s got eerie reminders of the dot com bust. These changes ripple their way through the economy ultimately impacting all markets. Interest rates on mortgages also have been on a steady clip upwards reaching their highest rate in about 20 years.

It’s clear that there are going to be some headwinds in the economy in the near future. As an investor you may be wondering whether to push forward and make your first or next investment or if it is better to sit on the side lines. Rising interest rates means that debt financing will be more expensive and deals with high returns will be harder to find.

One benefit for real estate investors is that the ability to easily leverage debt financing is one of the most powerful tools of real estate investing. Debt can be a friend or foe depending on how well you understand and use it. If used incorrectly good debt can become bad debt.

What does the rising interest rate environment mean for investors?

Rising interest rates can be good or bad depending on what perspective you have. In simple terms rising interest rates mean that the market is changing. One truth that remains however, is that whether interest rates are high or low investors are able to make money in real estate. If you want to continue to make money in real estate despite the changes in interest rates you have to understand what good debt is and how to use it to your advantage. In this article we will take a look at what is good debt and what is bad debt.