Master the Art of Leverage
Leverage is a man’s best friend.
How to use leverage to build wealth in real estate
We have all heard the concept of using other people’s money to make money. This is precisely what is referred to as leverage. One of the incredible characteristics of real estate is that it is “leverageable”.
Take for example a property worth $100,000. In many cases, a purchaser can acquire it with as little as $5000 down, with the remaining $95,000 being financed. As an investment, it is essential to calculate the return on investment (ROI) as a percentage of the down payment ($5000) and not the purchase price ($100,000).
In this example, a cap rate of 10% annually would equate to a $10,000 increase in net worth. Based on the $5000 investment, this is a return on investment of 50%!!
In 3 years I used $260,000 in cash to acquire $2,300,000 in real estate. Now that is some serious leverage my friends!
If you ever have any questions about real estate leverage, any at all, please don’t be shy. Give me a call or send me a text or email. I am always willing to chat real estate over a cold beer or strong coffee.