Mikkel Christensen
Some of the richest people on Earth could easily buy homes with cash. Yet several of them choose not to.
Some of the richest people on Earth could easily buy homes with cash. Yet several of them choose not to.
Even tech billionaires with vast fortunes sometimes rely on mortgages when purchasing luxury real estate, a strategy financial experts say can actually strengthen their wealth.
How the wealthy borrow
According to Fortune, Tesla chief Elon Musk has taken out large mortgages despite his enormous fortune. The Los Angeles Times reported he secured about $61 million in loans from Morgan Stanley tied to several California properties.
Considering Musk’s estimated $662 billion net worth, borrowing tens of millions might seem unnecessary. But advisers say the decision often reflects how ultrawealthy investors manage their money.
Most of their wealth sits in investments such as stocks, businesses, and other assets rather than large pools of cash. Selling those holdings to buy property could mean missing future gains.
“Ultrahigh-net-worth individuals think differently about liquidity and leverage,” Miltiadis Kastanis, executive director of sales at Compass, told Fortune. “They’d rather keep their money working for them in investments, businesses—or even art—rather than tying it all up in one property.”
Low rates advantage
Meta founder Mark Zuckerberg has used a similar strategy. CNBC reported that in 2012 he refinanced his Palo Alto home using a 30-year adjustable-rate mortgage with a 1.05% interest rate.
At such a low cost of borrowing, keeping millions invested elsewhere could generate greater returns than paying cash for the house.
“If they believe their investments will yield a greater return than the interest they’re paying on a mortgage, it makes more sense to finance the property,” Kastanis added. “It’s less about the cost of the loan itself and more about optimizing where their money is placed.”
Tax deductions can also play a role, while inflation can reduce the real value of money owed over time.
“Mortgages also allow for tax optimization in some jurisdictions, as interest payments may be deductible,” Islay Robinson, founder and CEO of mortgage brokerage Enness Global, told Fortune.
Strategy used widely
The approach is not limited to tech founders. Fortune reported that Paris Hilton took out a mortgage after purchasing a $63 million Beverly Hills estate from Mark Wahlberg.
Financial professionals say such moves are common among high-net-worth buyers.
“It surprises many people, but it’s actually quite common for the mega-wealthy to take out mortgages—even when they could write a check for the full purchase price,” Evan Harlow, real estate agent at Maui Elite Property, previously told Fortune.
The key lesson for ordinary buyers is not to copy billionaires exactly but to understand the broader financial principle.
“The takeaway for the average buyer isn’t to mimic their precise approach, but to understand the principle,” Harlow said. “Sometimes the smartest financial move isn’t paying everything off, but keeping your money flexible and working for you.”
Sources: Fortune
