The Power of Leverage in Real Estate Investing

  • Date: Oct 17, 2018
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  • Categories: Deals, News

The Power of Leverage in Real Estate Investing

 

A great article in Forbes.com by Alex Hemani

 

The Power Of Leverage

Many people understand the power of leverage in principle, but are a little unclear about how it plays out in practice. Consider this example: An investor has $50,000 to put toward single-family rental real estate. There are a number of options for how to use this capital, including:

• Option 1: Buy a $50,000 property for cash. This approach produces no leverage.

• Option 2: Put the $50,000 toward the purchase of a $100,000 property, using financing like a bank mortgage loan to cover the other $50,000. This produces 50% leverage.

• Option 3: Put the $50,000 toward the purchase of two $100,000 properties, again using financing to cover the remainder of the purchase price. This produces 75% leverage, and spreads your potential gains and risks over two properties.

 

Click here for the full article

 

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