Back in 1985, when I bought my first house in West Palm Beach, Fla., I woke up in a cold sweat at 3 in the morning. How was I ever going to repay the $55,000 that I had just borrowed to finance the two-bedroom, two-bathroom house that I had purchased for $75,000? Even though the bank clearly believed that my reporter’s salary of $400 a week was enough to cover my mortgage payments, morbid thoughts of foreclosure and bankruptcy raced through my mind, making it difficult to fall back to sleep. When the sun rose the next morning, I picked up the phone, called a roommate referral agency and found a young woman willing to pay $350 a month to live in my spare bedroom and help me cover my mortgage payment.

Sixteen years later, in December 2001, I was sitting in an attorney’s office in Midtown Manhattan buying another house. This one was a 19th-century townhouse property in New York’s trendy West Village that, thanks to the temporary downturn in the local real estate market after 9/11, I was scooping up for the bargain price of $5.25 million–a 26 percent markdown from the $7.1 million price tag that the property had carried before two hijacked jets destroyed the World Trade Center. Thanks to the more than $40 million in cash that I collected when my Internet marketing company, NetCreations, was acquired by a European conglomerate earlier that year, I was able to finance 100 percent of the purchase price by using my securities as collateral. Today, that property is worth roughly $8.5 million. Thanks to the generous rental income that the property generates, I have not lost a wink of sleep these last four years worrying how I’m going to service my debt.

The story of how I managed to stop pacing the floors and learned how to use debt financing to boost my returns in real estate and other investments is not the tale of one woman’s heroic struggle to overcome her fears. Despite my success as an entrepreneur and investor, I still get butterflies in my stomach anytime I close a major deal or make a big decision. I sometimes fear that, despite the $45 million in capital behind me and my years of hard-earned business savvy, I am going to screw up one day and lose everything. And not just for myself, but also for my two daughters and my nieces and nephews, along with the many other friends and family members who depend on me.

Self-help books and infomercials to the contrary, taking on debt to finance a real estate purchase–or any other type of investment–can be a very scary undertaking, whether you are borrowing $55,000 or $5.25 million. The lesson I had to learn was to stop managing my money like a $400-a-week reporter living check to check and to use debt financing the way the professionals do.

Lessons Learned
I did not learn about debt financing at business school. I am a self-taught entrepreneur who never took an accounting course or earned an MBA. Most of what I know about business I picked up in the trenches during my seven years running NetCreations, taking it public and then selling it to the Europeans. While most of the other dot-coms were little more than a business plan and a dream, our company had real customers, real sales and real profits.

When we found ourselves in need of money to grow, we simply called our bank, handed our account manager a list of our accounts receivable (the money that our customers owed us but had not yet paid) and set up a $100,000 credit line. Not only did our debt financing give us the capital we needed to build our business, but it also allowed my partner and me to keep control of 100 percent of the company until the initial public offering–and to walk away with a nice, fat paycheck even after the dot-com market collapsed.

When I left NetCreations at the end of 2001, I took the lessons that I had learned about debt financing into the world of real estate. My strategy is simple: If I can cover my interest payments with enough cash flow to let me sleep at night, I go ahead and borrow the money. Any appreciation that the property generates is icing on the cake.

Of course, strategy is one thing; execution is quite another.

"I sometimes fear that, despite the $45 million in capital behind me and my years of hard-earned business savvy, I’m going to screw up one day and lose everything."

Overcoming the fear associated with investing has been a gradual process. My biggest breakthrough came when I started thinking like a CFO, and not as a cash-strapped consumer. Most of us have been raised to believe that debt is a bad thing, and that is not entirely wrong. Anybody who is dumb enough to pay 19 percent interest on his credit card balances or lease a fancy sports car for $2,000 a month deserves what he gets. Personally, I take great pleasure in annoying the consumer finance companies by paying my credit card bills in full every month and driving a two-year-old PT Cruiser that I bought for cash. When it comes to my investment portfolio, however, I now feel very confident in using leverage to boost the returns on my real estate and other investments–as long as my inner CFO first checks out the numbers and decides they make sense.

Command and Control
It may seem odd that a woman sitting on $45 million should play such a hands-on role in the management of her portfolio. Some affluent investors simply turn it over to their wealth advisors, with whom they meet quarterly. Well, I do have wealth advisors–and accountants, attorneys, real estate brokers and plenty of other service providers who help me. Yet, because I did not start life with a silver spoon in my mouth, I will always think like a small-business owner with my hand on the throttle and my eye on the checkbook. This is probably, to some degree, an issue of trust. Even more so, it is an issue of control.

That is why I do not make a single investment decision without crunching the numbers in an Excel spreadsheet. While math was never my best subject in high school–I was the kid who was reading Pride and Prejudice and writing poetry in the park–it does not take a rocket scientist to put together a quick profit and loss statement to analyze the best- and worst-case scenarios of a particular investment decision. As I tell the clients who come to my small-business consulting firm for help, you must fight the battle on paper (or, in this case, a computer) before you risk deploying one dollar in the field.

I have also learned to continually reevaluate my investment strategy as the market changes. That is why I religiously read the New York Times, the Financial Times, the Wall Street Journal and anything else I can get my hands on. That is also why I keep a monthly spreadsheet (ah, yes, those spreadsheets!) that shows me to the penny how much each of my investments is worth. While it is tempting to blindly follow the advice that most wealth advisors offer about sticking with an investment strategy no matter what, your soup will burn if you are not watching the pot. Just ask anybody who bought dot-com stocks in February 2000 figuring that the market could only go higher.

When people meet me for the first time, they often wonder about my transition from newspaper reporter to dot-com CEO to management consultant and investor. How did I manage to learn all this stuff without having taken a single business course? To me, it’s all part of the journey that began back when I bought my first house in West Palm Beach, Fla. I didn’t make much money on that little house, but I did not lose it in a foreclosure sale, either–and I learned a lot of lessons about fear, investing and myself along the way.

Photograph by Thomas Hart Shelby.