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.