(in reality that
number could be higher or lower), you would see a net profit
from renting your property resulting in an approximately 15
percent return.
If you're content with little return of investment, you might
settle with your 15 percent return. But if you really want to
earn on your investment, consider the possibility of what
leveraging can do for you. At present, a typical real estate
investor can find financing as high as 95 to 97 percent of
the purchase price. There even some instances where you may
be able to get a 100 percent financing but we won't use this
for our example as it's an inadequate comparison.
So, if you're are an investor who is already content with a
smallreturn of investment then 15 percent sounds like a lot.
But for those who really want to make it big in the real
estate, 15 percent is far from being considered a noteworthy
return.
How does leveraging work?
Let's assume that the rental income will cover all your
expenses, including the mortgage payments. Taking the same
example, a 7 percent appreciation of your property results
in a $7,000 profit per year. With a 95% financing in place,
you'll be able to get a $7,000 return on $5,000 (your 5
percent down payment on a $100,000 real estate property).
This will provide you with a 140 percent return on your
investment. Not only that, with the same $100,000 you can
go out and purchase 20 investment properties, finance 95%
percent of them, and make an amazing $140,000 profit a year.
This totally beats the $15,000 profit with an all-cash
transaction.
In terms of the additional 20 properties, expect to have a
hard time getting financing for them since usually only five
or six new rental property mortgages are the maximum that
lenders presently allow. Which is why you need to have an
above-average negotiation skills.
Article written By Stu Pearson.
Article Source: http://activeauthors.com
Author Bio::
------------
Stu Pearson
stocks WA
mutual funds WA
email: jupita_fanklin12@yahoo.com
Here are some more estate planning articles...
