Leverage: wanna know the truth?
Make money off of cash that you don’t even have. Leverage is this wonderful ability to borrow a percentage of your investment purchase. You obviously can’t take out a bank loan to buy stock… but real estate is a banger leverage opportunity.
You can buy a $100,000 home with as little as $5,000; the bank finances the other 95% for you in exchange for a specific rate of interest. So you’re making money off of the bank’s cash that you never even had. For this reason, real estate makes a great investment–it usually appreciates over time.
Therefore if you have little money, a real estate investment could be a fantastic way to increase your net worth.
Actually, you can use leverage to buy shares - or just about anything else. The terms will usually be less favourable than buying property but such financing is easy to get. Just ask your broker or your bank.
Whether it is wise to use leverage is another matter.
July 31st, 2006 | #
Thanks for the correction, Trainne. I was hoping to suggest that the best leverage comes from real estate, though my bluntness doesn’t express that idea too well.
July 31st, 2006 | #
[…] Leverage means that you get to use someone else’s money to invest. The goal is to sell your first house for more than you bought it. To determine your purchase budget, use the standard mortgage formula, the 20/28/36 rule. Down payment of 20% of the purchase price […]
February 12th, 2007 | #
Katie,
Came here because of your carnival listing, but quickly changed gears to real estate investment.
From experience I think the real estate game is a bit more complicated than that. For example, with leverage what you really are buying is a spread. That is the difference between what you are paying the bank and what you are getting in rents. (Now flipping is a different story - have to make sure cash flow is there to support holding period.) But I totally agree on the increase in net worth (doesn’t count if yo live in it though…).
Where do you tend to invest?
Dave
http://businessadvicedaily.com
March 7th, 2007 | #