Even extremely wealthy people often do not pay for their real estate entirely out of their own pocket. Instead, many billionaires consciously rely on mortgages – even though they could easily buy the houses in cash.

One example is Tesla boss Elon Musk. According to a report in the Los Angeles Times, he took out loans for several properties in California, including a mortgage for around $61 million from US bank Morgan Stanley.

At first glance, this seems contradictory: Why should someone with huge assets take on debt? However, financial experts know that there is often a clear strategy behind it.

Super-rich think differently about debt

A large part of the wealth of very rich people is in investments such as stocks, company shares or bonds – not in cash. “Ultra-high-net-worth individuals think differently about liquidity and debt,” Miltiadis Kastanis of real estate company Compass tells Fortune magazine.

Instead of tying up capital completely in a property, it is better to let the money continue to work for you – for example in companies, securities or other investments.

Why mortgages can make sense for the rich

Financial experts cite several reasons why even billionaires often finance real estate instead of paying in cash:

• Capital remains invested: Money can remain invested in stocks, companies or other investments.
• Higher possible return: If investments generate more income than the mortgage interest costs, financing is economically worthwhile.
• Low interest rates: Especially in the 2010s, many wealthy people were able to secure loans at extremely low interest rates.
• Tax advantages: In the USA, mortgage interest can be partially tax deductible.
• Inflation: Rising prices can reduce the real burden of long-term debt.

Investments should continue to bring returns

Meta boss Mark Zuckerberg also used such a strategy. According to US broadcaster CNBC, he refinanced his house in Palo Alto, California, in 2012 with a 30-year variable-rate mortgage at around 1.05 percent.

With interest rates so low, it often makes more economic sense to leave your own capital in investments instead of investing it entirely in a property. “If someone expects their investments to yield more returns than the cost of the mortgage, it makes more financial sense to finance the property,” says Kastanis.

In addition to the possible return, the tax treatment also plays a role. In the US, mortgage interest can be tax deductible under certain conditions, which can reduce the effective cost of borrowing.

Inflation can devalue debt in the long term

Another factor is inflation. If prices rise over the years, money loses value. Loans taken out today can actually become cheaper in real terms if they are repaid over a long period of time.

“Mortgages can also bring tax advantages, as interest payments are deductible in some countries,” explains Islay Robinson, head of mortgage broker Enness Global, to Fortune. “And during periods of high inflation, it can be advantageous to borrow money today and pay it back later.”

For many very wealthy people, a real estate loan is not a sign of financial necessity, but rather part of a long-term wealth strategy.