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PeeverConn Properties
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The Power of Leverage
The following are examples of how this unique leverage system works in your favor: Example #1 - 100% Cash Purchase: This is the old way of buying real estate and it mirrors how other investments work (such as mutual fund investments). In this scenario you will buy the property with zero leverage. The Deal:
The Gross Profit:
Return On Investment: Gross Profit $100,000
Initial Investment $100,000 x 100 = 100% Return On Investment (ROI)
100% Return On Investment Over A Five Year Period Example #2 - 25% Down Purchase: Now a 100% return in a 5 year period is nothing to complain about. However, using the unique method of leveraging your real estate investment, you can vastly improve the return you receive on your investment. Most banks feel that real estate is a very small long term risk in their portfolio. Therefore, in most cases, they will provide you with 75% of the purchase (or appraised) price. All you need to come up with is 25%. The next example is exactly the same property, using the same time frame, only this time you have purchased it with just a 25% down payment, which is a standard figure that most investors can arrange at the bank. The Deal:
The Gross Profit:
Return On Investment: Gross Profit $100,000
Initial Investment $25,000 x 100 = 400% Return On Investment
400% Return On Investment Over A Five Year Period Example #3 - Secured Line Of Credit: Although 100% - 400% return is exceptionally good, using a Secured Line Of Credit (L.O.C) for your down payment can drastically increase your ROI even more and is now the sophisticated investors way of investing in real estate. Many real estate investors are commonly using a secured line of credit as down payment for investment properties as it enables you to not have to come out of pocket for the whole down payment but instead, only costs you the monthly interest payment associated with using the Line Of Credit, which is also a tax deductible expense. This next example is exactly the same property, using the same time frame, only this time you have used a Secured Line Of Credit (L.O.C) for your 25% down payment, which can be accessed through the equity in your personal residence or other investment properties you may have. The Deal:
The Gross Profit:
Return On Investment: Gross Profit $100,000
Actual Expense $5,000 x 100 = 2,000% Return On Investment.*
2,000% Return On Investment Over A Five Year Period *Please note that your actual expense is your total monthly LOC payments @ 4% interest over a five year period and are in most cases a tax write off.
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Thanks to the overall stability of residential real estate investments, banks and other
financial institutions will provide you with the majority of the total cost of your property
allowing you to vastly increase your Return On Investment (R.O.I). It will also assist you
in using as little of your own capital as possible, allowing you to invest in more property.