If you’ve been a part of the podcast audience for any length of time, you’ve heard us say a few (hundred) times that you must maximize leverage properly to create wealth in real estate. Right now, it’s Friday afternoon and everyone’s multi-tasking like crazy to get out of the office early, so let’s look at a quick example of how leverage works for you in property investing.
For comparison’s sake, we’ll pretend we put $10,000 in the S & P index and the same amount in an income property and compare the results over a recent ten year period. At the end of the test period, your $10,000 gambled in the S & P was worth $17,000.
But let’s look more closely at the real estate angle. With your $10,000 you bought a $100,000 property. Ten years later, even in the depressed California market, your property was worth $159,000. You still owed $90,000 on the loan, so pay it off and you’re left with $69,000, minus the original $10,000.
The tally:
S & P = $7,000 profit
Real Estate = $59,000 profit
Which number would you rather have in your pocket? The real estate investment outperformed the stock index by more than 800%. This is not an aberration. Income property investors are seeing numbers like this year in and year out. It’s not magic and it’s not calculus. A Empowered Investor Network investment counselor can show you exactly how to replicate this process.
