We 10X Our Wealth with Debt and You Can Do the Same

We 10X Our Wealth with Debt and You Can Do the Same | The Kitti Sisters

EP199: We 10X Our Wealth with Debt and You Can Do the Same


Is debt the scary hairy thing that we all need to shy away from? 

What if we told you that we 10X our wealth using debt as jet fuel in this episode we will challenge your perceptions and equip you with smart strategies so that you too can turn debt into a powerful asset.

Before we do this, we need to first talk about an old-fashioned 🍝 spaghetti western film starring Clint Eastwood called “The Good, the Bad and the Ugly.” 🎥

This phrase really transcends the title of a Western, in fact, it can also exemplify the distinction between different type of debts.

You see, most people are familiar with the bad and the ugly debt.

These are debts that come with high interest rates, and poor purchasing decisions and often lead to financial strains and sleepless nights.  

When you hear your grandma run screaming every time you mention taking on debt, this is probably what she’s thinking about.  And it’s not her fault.  The news and school rarely if ever talk about any other form of debt.  They truly paint a broad stroke when it comes to what debt is and this has led to a very tainted perspective on debt.

With that being said, we think it is not very smart to max out your credit card to fuel an Instagramable lux weekend escape 🏝️🩱🩳 that you can’t afford – let’s avoid that one.

However, we are definitely a strong proponent of smartly using the “good” type of debt as a major leverage for your growth. 

And we definitely did this on our way to 10X our wealth in real estate.

Today, a lot of people know us for acquiring more than $300 million in multifamily portfolio in just 5 years.  

However, just 5 years ago, we didn’t have a large pile of cash we could throw at any investment, in fact back then we were still licking our wounds from the demise of our fashion business. 

But we knew we wanted to get into multifamily apartments, we just didn’t have millions of dollars in the bank to pull it off.

So, how did we make it happen?

Before we break things down, let’s make this one point first.  

What determines a good debt is like the holy trinity in 🦐 Cajun or Creole cooking. 

With this type of meal, you need to have bell peppers, onions, and celery.

These ingredients are sautéed together and serve as the flavor base for many regional dishes like gumbo and jambalaya.   

Like the Cajun holy trinity, there are probably three major things you need to consider as part of any debt strategy: the term, mortgage affordability, and exit plan. 

Through these lenses, we will review our debt structure.

Let us breakdown ⏬

5 years ago, we started our multifamily apartment journey with 0 apartments in our portfolio.

We had a small amount of money, too small to think about the millions of dollars in property purchase.  We had no wealthy parents, uncle, or rich friends to rely on, but we had the hunger to succeed.

And that’s when we acquired our first multifamily apartment, a small property, with 76 units with a purchase price of $6.9 million. 🤓🤓

After that in 2020 – in the thick of covid-19, we purchased a 100-unit apartment for $6.2 million.  Then in 2021, we did three larger acquisitions: $16.9 million, $32.7 million, and then $29.4 million.

The bigger leap came in 2022 when we made a huge $68 million dollar acquisition, this was only to be topped by an even larger purchase in 2023 when we did a 🏢 $77 million apartment complex acquisition.  

With all these acquisitions, three of which have already gone full cycle – AKA sold within the average of 25 months of ownership, in other words we took on debt and made a boatload of money. 💵

You can see now that with our latest acquisition, we’ve more than 10X our portfolio in the last 5 years.  And it was only possible with one word: debt.  

The debt never scared us because we always evaluate debt on all our deals through three major lenses. Now, we are not saying for you to just haphazardly rack up debt left and right; it’s about making smart decisions and putting your debt to work for you. 

Think of it as captaining your ship through choppy waters—you need to steer with confidence and skill to navigate to a place of safety, and that’s your role as the borrower.

This means fully understanding your loan terms, being clear on interest rates, and having a solid plan for repayment.

So let’s dive into what that looks like in one of our recent acquisitions.

👉 We purchased a $77 million dollar apartment complex.  For this purchase, we raised over $38 million dollars in capital from our investors. And the rest was funded with a loan from HUD or The Department of Housing and Urban Development.

The loan on this apartment complex was around $44 million dollars, we raised a bit extra for working capital and reserve.

Ok, so you can see the first lens is understanding the loan terms. This was a loan assumption, meaning instead of taking out a new loan we are able to take over the existing loan from the seller.  

By doing this we are able to benefit from the favorable interest the existing loan has, in this case, the loan was a fixed rate loan at 3.49% with 38 years of amortization left – keep in mind that during this time should we get a new loan interest on it would be in the 7 or 7.5%.

And on a $44 million dollar loan, the difference is over $1.76 million dollars in mortgage payments per year, which automatically translates to additional cash flow for our investors.

So this was definitely a very beneficial loan and this helps with our cash flow predictability as well as expense management because we know exactly what our mortgage payment is.  

Another benefit to having a loan that is fully amortized is that from the start we are paying the mortgage that includes both the principal and the interest. 

Well, we say “we” but it’s not really us paying the mortgage right? 

It’s our tenants. 😍😍

So our tenants are helping pay our mortgage, reducing our debt while growing our equity.

Such a beautiful thing. ❤️

Now, we’ve already touched on the second point that determines whether a debt is a good one or not, that is the debt-serving aspect or our ability to pay the debt.  

Guys, we want you to remember this point:  new and experienced investors tend to run away from a good deal because they are afraid of the current high-interest rate.

But here’s the thing, if you properly account for your debt, then the cost of money is truly irrelevant. 

In our case, our loan term came with a high level of certainty because it’s a fixed-rate loan with a 38-year loan term. 😌😌

We are easily able to punch in the loan amount, the interest rate, etc. into our investment analyzer and then project if the net income of the property can support the debt service or mortgage on this property.  

For investment properties, the tip is you want more net income beyond debt service, etc, because that is considered cash flow.

Always make sure that your loan term is in alignment with your business or investment plan, without this alignment, you may be stuck in a deal that you can easily sell earlier otherwise.

As you are on your way to create your own 10X wealth in multifamily, it’s very important for you to have assembled a winning team to help you achieve your results, so tune in to this episode on Winning Formula Assembling an Apartment Sponsorship Dream Team. 📺

Thanks for tuning all the way to the end.  Until next time, dream big, and keep making those dreams a reality! 



The Kitti Freedom Club


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We're Palmy ➕ Nancy Kitti 〰️ The Kitti Sisters

A sister duo team obsessed with all things financial freedom, passive income, and apartment investing + apartment syndication, who turned a $2,000 bank account into a nine-figure empire.  Now, we're sharing with you the behind-the-scenes secrets of our wealth building strategy.

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