Much has been said about real estate and its wonders. But do you really know the real score on how it creates wonders for your money? After all, different people hold various opinions on how much good do leverage and OPM (other people's money) have.
First of all, always make a qualified mortgage professional part of your team of experts; the examples that follow may not be appropriate or even possible for your particular situation. Some people have the goal of receiving cashflow every month to supplement their incomes while others want long-term financial success through investment appreciation.
Let's look at what choices you can make to achieve your goals. Remember, with real estate, YOU are in control! For the example we'll say you have $20,000 to work with. With this $20K you could put down a 20% down payment on a $100,000 property or a 10% down payment on a $200,000 property. Which one is better?
The answer naturally depends on your particular situation and goal. But let us probe into the differences. With the assumption that you chose the larger down payment, it is possible for you to get cashflow because you will give "lower" mortgage payments and at the 20 percent down payment, you will no longer need mortgage insurance. Do you prefer receiving monthly cashflow? Well then, a larger down payment makes you attain just that.
Assuming that for the $100,000 and $200,000 properties, the appreciation is set at 6 percent (Please note that the appreciation rate actually varies depending on their locations, type of property, etc..but for this article, you can well disregard these differences). That translates to these figures: the $100,000 will be worth $106,000 after a year of appreciation and the $200,000 becomes $212,000.
The amount of appreciation for both properties ($100,000 and $200,000) obviously doubles itself year after year. All these and more, but you would not be spending any thereby saving yourself some serious bucks!
In no time at all, savvy investors like you will have enough to get you some equity and you can eventually purchase another property. The MORE properties you have working for you, the better the effects of appreciation will be. What are you waiting for? There will be some limitations in paying a lower percentage down payment though such as additional maintenance costs. But those are minor issues if you compare it to the long-term benefits it promises.
Not only are you getting more advantage by using more leverage (OPM) and getting less monthly cashflow, but you are also spared of minding other things. While debt payments and maintenance costs are tax deductions, cashflow is taxable. If you need the monthly cashflow, you can just modify your strategy to accomplish what you think works best for you. Perceptive investors agree that extra cash spent every month results to huge wealth building benefits in the future.
With these in mind, its not surprising that you chose the better one. Start pooling your team of experts now and make the right choice!
First of all, always make a qualified mortgage professional part of your team of experts; the examples that follow may not be appropriate or even possible for your particular situation. Some people have the goal of receiving cashflow every month to supplement their incomes while others want long-term financial success through investment appreciation.
Let's look at what choices you can make to achieve your goals. Remember, with real estate, YOU are in control! For the example we'll say you have $20,000 to work with. With this $20K you could put down a 20% down payment on a $100,000 property or a 10% down payment on a $200,000 property. Which one is better?
The answer naturally depends on your particular situation and goal. But let us probe into the differences. With the assumption that you chose the larger down payment, it is possible for you to get cashflow because you will give "lower" mortgage payments and at the 20 percent down payment, you will no longer need mortgage insurance. Do you prefer receiving monthly cashflow? Well then, a larger down payment makes you attain just that.
Assuming that for the $100,000 and $200,000 properties, the appreciation is set at 6 percent (Please note that the appreciation rate actually varies depending on their locations, type of property, etc..but for this article, you can well disregard these differences). That translates to these figures: the $100,000 will be worth $106,000 after a year of appreciation and the $200,000 becomes $212,000.
The amount of appreciation for both properties ($100,000 and $200,000) obviously doubles itself year after year. All these and more, but you would not be spending any thereby saving yourself some serious bucks!
In no time at all, savvy investors like you will have enough to get you some equity and you can eventually purchase another property. The MORE properties you have working for you, the better the effects of appreciation will be. What are you waiting for? There will be some limitations in paying a lower percentage down payment though such as additional maintenance costs. But those are minor issues if you compare it to the long-term benefits it promises.
Not only are you getting more advantage by using more leverage (OPM) and getting less monthly cashflow, but you are also spared of minding other things. While debt payments and maintenance costs are tax deductions, cashflow is taxable. If you need the monthly cashflow, you can just modify your strategy to accomplish what you think works best for you. Perceptive investors agree that extra cash spent every month results to huge wealth building benefits in the future.
With these in mind, its not surprising that you chose the better one. Start pooling your team of experts now and make the right choice!
About the Author:
Author and Realtor Alexandria P. Anderson helps clients to find and purchase Plymouth MN Real Estate as well as Property for Sale in Plymouth, Minnesota.
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