Investor Resources

To increase buying power

Simply put, instead of buying one asset with all cash you could use the cash as a down payment and use debt (borrowed from an institution or bank) for the remainder of the purchase price, giving you the ability to purchase a more valuable asset or multiple assets. 

For example, if you had one million dollars:

- purchase one asset valued at $1M with NO debt

- purchase one asset, valued at $4M = $1M down (25%) and borrow $3M of debt (75%)

- OR purchase multiple properties using the $1M as down payments and leveraging debt to satisfy the rest of the purchase price at whatever loan to value ratios make the sense. See diversity below!

To increase diversity

If you have a single asset and possibly one tenant, you have single asset risk. That means all your eggs in one basket; if that asset or area takes a negative economic hit or a natural disaster affects that geographic area, one hundred percent of your investment just got affected. 

If you were able to invest in multiple assets, different asset classes and/ or geographic regions, the risk would be spread out across various assets and areas. Our (Dual City Investments) Advantage Fund was formed specifically for the reason of spreading out risk and protecting investor capital across regions, asset classes and asset types. 

To maintain liquidity

Using debt, you can maintain some form of liquidity, this simply means you will only need to use a portion of your capital to purchase an asset versus using it all, or most, by not using debt.  By leveraging debt, you can keep some buying power for future opportunities, showing lenders you have capital at hand to get loans or just having it for that rainy day fund.

Example: 

If you have $1M and want to buy a $1M asset with all cash, then you’re out of cash and you lose future buying power, diversity and available liquidity. 

To get yield spread

In this instance, yield is basically described as the spread between the amount of money it costs to borrow debt (usually represented by a percentage) and the net revenue generated by an asset. In a ‘normal’ market, you can put your money out (buy investing in real estate) at a higher return than what you can borrow from the lender.

You can achieve this by actively investing; acquiring an asset doing due diligence and overseeing its operations, or passively investing; find an ethical and responsible investment firm that does all of the above for you under some sort of compensation structure. 

To increase tax benefits

Using leverage, you can increase your tax write offs including interest write offs and depreciation. 

In conclusion, some debt is bad and should be paid off or consolidated such as revolving, high interest rate, personal debt. But some debt can be used for your benefit and if used and leveraged correctly you can really build wealth, networth, and passive income.

Dual City Investments is a commercial real estate investment firm built on fidelity and integrity while focusing on providing private equity investment opportunities with investor security as our priority. Our firm’s mission has been to produce consistent investment returns through a systematic approach across investment real estate and specialty asset classes. We provide trustworthy and consistent real estate investment options and specialize in identifying opportunities that allow for long-term wealth building.