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Updated 9 days ago on . Most recent reply

User Stats

493
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Devin James
  • Developer
  • Orlando, FL
299
Votes |
493
Posts

The Power of Leverage (Cash Vs. Leverage)

Devin James
  • Developer
  • Orlando, FL
Posted

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.

  • Devin James
  • [email protected]
  • Most Popular Reply

    User Stats

    3,229
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    V.G Jason
    • Investor
    3,290
    Votes |
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    V.G Jason
    • Investor
    Replied

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


    What's the math then out of curiosity?

  • V.G Jason
  • Loading replies...