The Power of Leverage (Cash Vs. Leverage)

[Devin James]

Buy a $500K home. Hold for 5 years. Sell for $600K.

After closing costs, you net around $564K.

Option 1 – All Cash:

- Invested = $500K

- Profit = $64K

- 2.44% annual return

Option 2 – FHA Loan (3.5% down):

- Invested = $20K

- Profit = $64K

- 26% annual return

Same house. Same sale price. Vastly different ROI.

**Excludes PMI, taxes, and monthly payments but the principle stands.

[V.G Jason]

Put both monthly payments in with a 7% interest rate(today's rates). 

What's the math then out of curiosity?