How To Use Leverage To Become A Successful Property Investor

When you acquire investment property, there is something very essential that you must use so that you can become successful - LEVERAGE.

If you think that you can do it yourself, it is going to be a very slow and painful way up. Good property investors habitually leverage on other people's time, know-how and most important of all, money, to create a portfolio of investment properties that continually bring in profits for them.

The most convenient way to leverage is via a bank loan. Let's keep things practical and assume that your investment property is valued at $100,000. If you were to pay cash for it, you will have to get hold of the $100,000 on your own. Whereas, if you take up a bank loan, you probably only need to get hold of about $10,000 and borrow the rest of the money. And after that you rent out the investment property and let your tenant settle your bank loan.

Consider if you were to buy an investment property valued at $1 million or much more. How are you going to raise that kind of capital?

Another contributing factor to take a loan as opposed to shell out the full cost of the investment property is that subsequently, if your investment property appreciates in value, you would have made a substantial income. If the investment property appreciates in value by 10%, you can actually sell it off at $110,000, therefore you turn a profit by $100,000 given that you only paid $10,000 as the deposit and borrowed the rest. Now compare that to if you paid cash for the investment property. Your entire profit would only be $10,000 which is the sum that the investment property appreciates in value.

Naturally this is a very simple equation, but in reality, you still have to keep in mind other facts like prices, interests, legal charges and other miscellaneous fees that the sale and purchase of your investment property will incur.

Another way to leverage is with other people's experience. This is where participating in a team comes in. Smart property investors will always network with other property investors. Occasionally, they contact developers in concert as a group and see if they can get good buys. With more members in a group, they can each contribute something to the table and have the ability to make better selections when it comes to selecting investment properties to buy.

Besides, not every one will likely have the opportunity to go shopping for investment properties. So they can diploy several members from the group to go have a look at the property and see if it measures up to their standards. This is also where other people's skills come into play. You may not be familiar with the neighborhood where you intend to purchase your investment property really well, but someone else on your group may. You may reckon that the neighborhood looks good but your group member may think otherwise because he or she is aware of something that you don't.

This is how good property investors are able to accumulate a huge collection of investment properties in a short period of time.

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