It is inefficient to hold real estate for pure equity. The return isn't high enough to justify it and the tax consequences aren't great. When instead debt provides the majority of the capital, you get a combined interest deduction and depreciation allowance close to the overall cash flow. Tax liability is therefore minimal.
An example may illustrate this. Suppose I can borrow at 6, the gross cash flow is 12 percent of the price, and operating expenses take 1/4 to 1/3 of those "sales" (which is going to vary, as I operate - fluctuations in percent rented etc). Depreciation allowed is typically 27 year straight line, call it 3.5%. Let the capital value be a million, and first suppose I use all equity. Then I get -
120,000 cash flow
30-40,000 expenses
80-90,000 net
35,000 depreciation deduction
45-55,000 taxable income
15-20,000 taxes
60,000-75,000 net after tax
Not a high return. And some of that is just return of capital. Now instead I expand to 3 million property value with 2 million in mortage debt at 6%. Same equity as before.
360,000 cash flow
90-120,000 expenses
120,000 debt service
120-150,000 net
105,000 depreciation deduction
15-45,000 taxable income
5-15,000 taxes
105,000-145,000 net after tax
A much more respectable, equity-like 10.5 to 14.5% after tax return. Note that taxes paid barely moved, despite a 3 fold jump in gross. That is because the equity portion of the financing captures all the benefit of the depreciation deduction. Debt is already a tax efficient form of capital (a deductible business expense) without needing to share in the depreciation.
The net and the depreciation should be close, but one should always be paying taxes even when the operating fluctuations go toward the high expenses side of their expected range. More leverage than that and you start running nominal losses, which is tax inefficient and can complicate borrowing.
Public REITs have readier access to capital than private rental companies, so you might think they could afford to run more leveraged operations. In practice, though, they compete with other REITs for conservative investors. Financial stability is highly valued therefore. So they tend to the 1/2 to 2/3rds debt range. While private firms often go higher (to 3/4 e.g. - above 4/5 is known to be distinctly unsound and banks usually won't lend that far).
For what it is worth.
I don't own a rental home but i do own a fair amount of geometrical property and routinely can if I desire borrow 80% loan to value on the mortgage from commercial banks.
There are SBA loans out there (which I do not qualify for) that will loan 95% loan to value....but they have strict covenants. It all depends of the appraisal of course.
I also borrow from institutional firms like pensions and insurance companies and they routinely offer 80% loan to value of either the appraisal or verified cost whichever is lowest. They give nice amortizations though...25-35 or even 40 years.
If this guy used 3M in cash to buy 10M in residences, that doesn't seem like too much leveraging to me unless he overpaid. I would bet he is hoping for more property appreciation than a cash flow commercial developer-investor like myself. Equity is nice but you can't eat it. I generally sit at around 55% LTV but will take a temporary spike on an acquisition or new development to even 80% on that particular deal if I think cash flow will rise and decrease the LTV.
I have seen homebuilders and banks do incestuous deals with appraisers where by they routinely over appraise by 10-20% so folks can do no money down home purchases...in fact that is rather common. It is rather uncommon in commercial deals. The only things about REITs I'm familiar with are that they have been decent in the past few years, they often make passes at my properties but then want to do holdbacks and fees at the end...a waste of my time, and that they have to use their rents or pay them out as dividends.