he term leverage in the property with a fair market value
world of finance is defined of $100,000. The $10,000 is 10%
as borrowing money to of the value and makes a nice
purchase a company and relying on down payment. The mortgage is now
it to produce enough capital to $90,000 and you have equity of
cover the interest payable on the $10,000. Your net worth has
loan. This is the type of increased by $90,000.
leverage that investment in real
estate properties provides. Let’s say the property produces a
cash flow of $900 per month. The
You do not have to be rich to monthly note on a 30-year loan at
invest. The goal, of course, is 7% is only $598. Your positive
to make money for the long term. cash flow is $302. If you paid
The principle is rather simple: all the cash flow into the
spend a little to make a lot. monthly payment, and if you
Take the $10,000 you have bought the property in 2006, you
accumulated in equity, use it as would have the property paid off
a down payment on an investment in 2019 – 13 years – and the
property that has a positive cash interest you save would be over
flow, use the cash flow to pay $121,000.
the mortgage and your investment
will appreciate into ten times There are two directions you
the original amount over time. could go. One is to buy and hold.
This means that you buy this
It is interesting to note that property and you hold on to it
after you have invested in a with everything you have. It
property; your net worth has absolutely should increase in
increased substantially from your fair market value. You should see
initial investment. Let’s take increases in cash flow. You could
that $10,000 and buy a piece of add these increases to your note
and then you could be realizing to benefit from the tax savings.
in a short period of time a nice, When you take this route, you
regular income from this piece of will actually be raising your net
property. That retirement nest worth by much more than equity
egg would be actively working for because you will be steadily
you over numerous years until increasing your net worth by more
retirement and through than just the cash flow from your
retirement. investment.
If you think you do not have the If you were to take the
time between now and when you fast-track accumulated equity you
want to retire, think again. The have built by paying double or
other direction may be for you. triple the principle each month
You could build some equity in and trade up to a property worth
the property we talked about $200,000 rather than $100,000,
above. Then you could trade up you could double your cash flow
using the equity you built in and pay off the mortgage in 16
making double payments and years. That would give you a
investment tax incentives. hefty cash flow at retirement
with a very small initial
You should always trade up in investment.
value or equal in value in order
About the Author:
Investment Property Specialist - Alex Anderson Connects Real Estate Investors With High-Quality Investment Properties. Get A Free Copy Of, "The Investor's Rental Guide" at:
www.GreatInvestmentProperty.com
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