#10 Use of Leverage
One of the most powerful benefits of investing in real estate is through the use of leverage.
Leverage is the ability to control a large asset using a relatively small amount of capital. When it comes to investing in real estate, leverage can be a powerful tool that can help you amplify your returns. For example, if you purchase a rental property for $100,000 using a 20% down payment, you are leveraging $80,000 of other people’s money (typically from a mortgage lender). This means that you are able to control a $100,000 asset using only $20,000 of your own money.
Leverage can also help you to diversify your portfolio. By using leverage, you can invest in multiple properties, which can help to spread risk and increase the potential for returns. Additionally, leverage can also help to increase your cash flow, as the rental income can be used to pay down the mortgage and generate a positive cash flow.
Furthermore, leverage can also help you to take advantage of market fluctuations. For example, if property values are trending upward, leverage allows you to purchase more properties and benefit from the appreciation. On the other hand, if property values are trending downward, leverage allows you to purchase properties at a discount and hold them for the long-term.
In summary, leverage is one of the most powerful benefits of investing in real estate. It allows you to control a large asset using a relatively small amount of capital, diversify your portfolio, increase your cash flow, and take advantage of market fluctuations. If you’re looking for an investment that can help you to amplify your returns, real estate is definitely worth considering.