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.