Now doesn’t THAT sound great? You invest and earn, other people pay for it. That is one of the other key advantages property has over most other forms of investments. Let me explain.
The Greek scientist and astronomer Archimedes is quoted as having said: “Give me a lever long enough, a fulcrum strong enough and I’ll move the world.” In property investing, we are using the very same principle of leverage to our advantage. Leverage means that we are magnifying a financial outcome using given resources.
One example: You have $100,000 available to invest and there are investment properties on the market that are suitable for you that cost $100,000 each. You could buy:
A – One property for all your cash.
B – Two properties, make a downpayment of $50,000 against each of them and loan the remaining sum from a bank.
C – Five properties, make a downpayment of $20,000 against each of them and loan the remaining sum from a bank.
Would you like to own one, two, or five suitable properties? This is the power of leverage. In scenario A there was no leverage, so we could only acquire one property. In scenario B we leveraged 2:1 so we could buy two properties and in scenario C we leveraged 5:1 so we could buy five properties with the same amount of cash!
So the bank has paid 50% (scenario B) or 80% (scenario C) of your investment for you. And guess who will be paying the mortgage payments? No, it’s not you, but your tenant! If you have done your homework correctly, the rent received covers all your costs and you still have money left over every month as passive income.
What if you don’t have $100,000 or even $20,000 of cash to invest? There are many different options on how to overcome this challenge, but the easiest is simply to ask somebody who does have cash. If you think that this is not right, think again! It might just be one of those limiting beliefs you have that I mentioned earlier on and I’ll help you to overcome it.
What if you know somebody who has $50,000 and you find a great, suitable property for $100,000 and you take a bank loan for $50,000 and invest together with your friend or relative and split the profits? That is called co-investing and is a true win-win situation.
You win because you can participate in the deal without any cash. Your co-investor wins as he/she would potentially not have found that great deal him/herself. The bank wins as it has a new loan customer. The agent wins as he/she gets commission. The seller wins as he/she has sold his/her property. How much better can it get?
Of course there are many practical aspects involved in such scenarios, so please ensure you have the right knowledge before you embark into such ventures and consult professionals where necessary.
Do you still think now that you need a lot of money to invest in property? Or, that you only need the right knowledge, an appropriate process and contacts, plus the right mindset?
More Advantages Of Investing In Property
There are a few additional advantages of investing in property. If you buy a mutual fund, the fund manager makes the decisions. If you buy stocks, the CEO of the company calls the shots. If you buy a property however, you are the “CEO”. You can change it, furnish it, upgrade it and so on. You are in control.
There is a constant supply of old and new properties on the market across multiple different market segments. This allows you to deploy different strategies that suit your investment style, financial situation, and risk appetite. It is totally flexible.
Armed with the right knowledge, property deals are easy to analyze, understand, and execute. For some of the complex financial products, even sophisticated investors sometimes cannot understand them.
The Property Apprentice Master, Jochen Siepmann, wants to share the wealth of his knowledge easily and effortlessly with you for FREE. Start your journey now to greater wealth through passive real estate income and capital appreciation with one, or all, of these FREE offers: