Leverage Your Money In Real Estate
January 31, 2013 | By admin |
If you manage to gather a certain amount of money and manage not to spend it, it is time to decide how to invest it so that it brings you profit. Unfortunately the money can be spent only once, but if you invest it, you will be entitled to a regular income your whole life.
So the best thing you can do is to leverage your money in real estate. How is this done? For example if you have an amount of money, you can use it as a down payment for a real estate and the rest of the money can be obtained as a loan from the bank. Thus you are able to invest in property which will bring you a good profit. Why should you take a loan from the bank and not invest just the amount that you have? The answer to this question is very simple and reasonable. If you invest in property a small amount you will be able to buy something small which will not realize a high rental property return. On the other hand if you leverage your money in a wise way, you will be able to realize a substantial real estate cash flow after you subtract the costs of covering the credit monthly installments.
For example if you have an amount of $20,000, you can buy a very small property which will bring you a small rental fee. But if you use your $20,000 and take a loan of $80,000, you will be able to buy at least three properties which will bring you a much higher return on your investment – this is how to leverage your money in real estate. Of course this should be done after you calculate correctly how much you will have to pay for the credit, so that you know what your profit will be. Also when you invest in property it is very important to anticipate on the worst that can happen. So do not rely that the rent you are being paid now, will be higher the next year because it might happen otherwise. If the economic circumstances change, it is possible that you will have to lower the rent so that you realize at least a small profit. But you should always bear in mind not to overestimate the situation because you might end up paying the credit from your own pocket and lose your primary investment.