Good Debt vs. Bad Debt Before diving too deep into the discussion of whether or not it’s smart to invest in rental properties when you have existing debt, it’s important that we discuss the nuances of debt.
With bad debt, there is no appreciating asset.
As the old saying goes, good debt will make you rich, while bad debt will make you poor.
Related: How Debt & Taxes Make the Rich Richer and the Poor Poorer Investing in Real Estate With Debt Very few Americans are totally debt free.
There are plenty of people who have gotten rid of their bad debt, but even those people typically have some good debt on the books.
Thus the question arises: Can/should you invest in real estate while in debt?
For a real estate investment or second mortgage, that number is probably a lot closer to 20 percent.
The biggest pro to investing in real estate is that it provides you with additional cash flow.
This money can then be used to pay down debt, which accelerates your ability to build wealth.
The biggest downside to investing in real estate when you’re already in debt is that your monthly payments only increase.