Leveraging money in Real Estate

Leveraging money in Real Estate means making money on Property Investments. This is for sure the most exciting part of investing in income properties. I’ll give you a hypothetical example of leveraging money by buying investment properties. So this is how it works exactly:

Let’s assume that you’re buying a new house from the builder that costs $100,000, and you’re putting down 20%, or $20,000. Then you give the builder a $5000 deposit check (that’s applied towards the $20,000 down payment later on). You wait 9-12 months while they build your house. Hopefully, each time the builder releases a new phase the price will increase a bit. By the time your house is built, it’s possible it may be selling for 110,000 dollars.

Notice that immediately, upon closing on your new property, your $20,000 down payment will be worth $30,000 in equity in the house. So you’ve made a 50% return on your investment immediately!

What you can do next is find tenants into the property, and you’re breaking even on your monthly costs – or maybe you’re making $100 profit each month. Not bad. A year later, property values in that community have gone up 9%. Your $110,000 house is now worth $120,000. That’s one hundred percent return on your initial investment just in one year.

Wait 5 or 10 years, and your property value has doubled from $110,000 to $220,000. Your initial $20,000 investment has increased six times. Now, you can refinance and take the cash out of this house to buy others – or sell it and exchange it for three houses in the next up and coming community. And that’s how leveraging money in real estate looks like.

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