I have enough money, should I buy my AOT for real estate investment money? No, I am absolutely against the board to invest large sums of money in a single real estate investment. There are two reasons why not. First, you give most of your profits through the use is not your property investment. Secondly, it is far too risky to put all eggs in one basket. Let me explain the leverage issue for a while.
I’ll give you an example of $ 100,000 held as investment property that typically increases its value (appreciates) by 7% per year. Maybe more, maybe less depending on where you live. Paying all cash for this property is in an appreciation of 7% of profits, plus net income from the rental of giving way. Well, look Aore about 15% of turnover.
If you, your investments Aore Conservatives could be satisfied with this kind of return. These days you might get better yields equal or with other conservative investments minus the cost of an owner. But you, the spirit of AOT, a homeowner, because you understand and use the lever of the method with financing your real estate investment. With the example above, you are about $ 15,000 per year in profit from your investment. Now let’s look closer aos, what use for you.
Today a typical real estate investor is to obtain financing more than 95% – 97% of the purchase price. From time to time a 100% financing is also available. But it would be totally unfair in this example, to compare this with all cash purchase. 15% return may seem a lot, but wait until you get. Let aos assume that the rental income, all expenses including mortgage payments coverage. Under the same example from before your net return of 7% of the profits from the appreciation of your property would be.
This would result in earnings and $ 7,000 a year. With funding of 95% instead you back $ 7000 to $ 5,000 (5% of your down payment) invested. This is an enormous 140% The return on investment.