Every investor hits this fork in the road sooner or later: should you go with debt or equity when putting money into real estate? The answer isn’t one-size-fits-all. It depends on your goals, your risk tolerance, and how actively you want to be involved. But if you’re an accredited investor looking for predictable returns without all the hands-on headaches, there’s a strong case for leaning into real estate debt.
Let’s break it down the way any private lender would when evaluating a deal.
Debt Investments: Fixed Income, First in Line When you invest in real estate debt—like the loans offered through Yieldi—you’re effectively acting as the bank. You’re lending money to a borrower (usually a developer or investor), and in return, you’re earning interest on that loan. Simple enough.
But here’s the kicker: debt investors get paid first. If a deal goes sideways, the lender has the legal right to foreclose and recover their capital before any equity investor sees a dime. That’s what makes debt such a compelling play for risk-conscious investors.
At Yieldi, we structure first-lien loans secured by real property, with conservative loan-to-value ratios—typically around 65%. That means there’s a built-in cushion protecting your capital if something goes wrong.
Pros of Real Estate Debt:
- Steady passive income (interest payments monthly or quarterly)
- Lower risk due to collateral-backed security
- Shorter durations (most of our deals are 6–12 months)
- No need to manage property, tenants, or contractors
Cons?
- You’re capped at the interest rate—no upside if the property doubles in value
Equity Investments: Higher Upside, Higher Risk. Equity investors get a piece of the ownership. They benefit from appreciation, rental income, and any profits when the property is sold. Sounds great, right? It is—when things go well.
But equity sits behind debt. If a project fails, the equity gets wiped out first. And while there’s potential for a big payoff, there’s also a chance returns fall short—or never materialize at all.
Pros of Real Estate Equity:
- Unlimited upside potential
- Participation in appreciation and profit-sharing
- Tax advantages like depreciation and 1031 exchanges
Cons?
- Higher risk
- No guaranteed income
- Longer hold periods (3–7 years isn’t unusual)
So, Which Should You Choose? Ask yourself a few questions:
- Are you looking for consistent income or speculative upside?
- Do you want a short-term commitment or are you fine locking up capital for years?
- Would you rather be in a senior, secured position—or roll the dice for a bigger payout?
If you value predictable, asset-backed returns and like the idea of monthly income without the volatility of the stock market or the baggage of owning property, real estate debt is worth a hard look.
At Yieldi, we give accredited investors access to passive income opportunities through carefully underwritten real estate-backed loans—without the complexity of managing properties or syndications. You pick your deals, know your return up front, and earn monthly interest backed by tangible collateral.
Real estate debt isn’t just an alternative investment—it’s a smarter one for investors who prefer stability over speculation.