Do you want to know the best way to use your money? Would you like to learn the basics of real estate investment? Fret no more because you will discover valuable pointers in using leverage and OPM (other people's money) that makes real estate an excellent tool in investing! The first thing you must remember is that your team of experts demands an equally competent mortgage professional. Depending on your goal and current situation, the scheme to acquire financial success may vary. The following examples present scenarios but they may or may not suit your specific situation. Let's look at what choices you can make to achieve your goals. Remember, with real estate, YOU are in control! For the example we'll say you have $20,000 to work with. With this $20K you could put down a 20% down payment on a $100,000 property or a 10% down payment on a $200,000 property. Which one is better? There is no right or wrong answer; again, it depends on your goals, but let's look at the differences. Whenever you make a large down payment it is more likely that you will be able to get cashflow because your mortgage payments will be lower and at the 20% mark you do not need mortgage insurance. So if cashflow is what you desire, larger down payments help you achieve that. On one hand, let us say that the appreciation is set at 6 percent for both properties. (Appreciation rate varies depending on the location, type of property, etcbut for this specific article, we will assume it at 6 percent). In just a matter of one year, your $100,000 property is now worth $106,000. However, the $200,000 property becomes $212,000! With the 10 percent down payment on $200,000 property, you doubled your appreciation's amount (sans the need to use up a penny or more). Now imagine what you got after a few more years. Amazingly, you compound your money's worth! In a relatively shorter time, your gain will be sufficient to obtain equity and purchase another PROPERTY so you actually have doubled your properties and compounded their appreciation. On another hand, the cashflow might not be present in the $200,000 property and perhaps there will be times when you have to expend for maintenance costs but look at the greater appreciation and long-term benefits. Moreover, you get more advantage since debt payments and maintenance costs are tax deductions (using leverage or OPM and getting less monthly cashflow) unlike cashflow that is taxable. In the case of some people who needed monthly cashflow - the solution is simple, your approach can be modified to get what you really wanted. Besides, most people would agree that extra payment every month realizes wealth building benefits in the future! The choice is yours! Build your team of experts to help you make the right decision.
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