A friend of mine wrote this article on the power of leverage while investing in real estate. Just wanted to share some of his observations and get your takes on how you use the power of levearge in your investments. Feel free to share and critique.
I find it well written. I think the math is sound though I don't think that 90% leverage is really a great example. It makes the deltas look much better, but is 75% to 80% is more realistice and would still make the same argument. Maybe you can get 90% LTV, but that would have to be expensive on the PMI and the interest rate and the like. His point is clear though, if you have the risk tolerance, you can be financially free long before you can be debt free if you employ intelligent leverage.
Leveraging 90% when its a foreclosed property and rehab is required is a very wise move. Little money out of pocket and when you refinance into a long term debt loan, you may be able to get your original down payment funds out to recycle into the next project while leaving 25-30% equity in the property as well.
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