What is the best way to make money in real estate? Buy quality properties without using any of your own money!
I don’t mean that you should take over a lot of Junker houses using no money down techniques. Many of these techniques are simply gimmicks that make you the owner of an over-priced property that nobody else wants.
I mean use proven techniques to leverage business lines of credit to buy good property. If you are using unsecured lines of credit to get money, you can buy a lot more real estate than you can buy if you only used your own cash.
Seems like a no brainier to recommend that people buy 2 houses instead of one, but you will meet people that still believe that it’s a good idea to use ONLY their own cash buy real estate.
How much real estate could you invest in if you never needed to use your own money?
The rich get rich because they control more assets than we do. They buy 5 good investment properties to every 1 that we buy.
Everyone historically makes money in real estate – the rich just make a lot more because they own a lot more. And they buy all this real estate using lines of credit.
This is simply called using leverage not cash to invest in real estate. But the opposite of using leverage is to pay ALL cash for property and own it free and clear.
Why do some people still want to own real estate free and clear?
Because they believe that they are making more money if they borrow as little as possible to buy it.
But lets look at 2 examples to see which example makes more money.
Example 1.
Use $40,000 of your personal savings to buy a house with 20% down and get a mortgage for the rest.
You may cash flow $400 per month with this scenario.
And on this one house you will also be getting -
A. equity build up like a personal saving account as your tenants help you pay down the principal on the mortgage each month..
B. appreciation as the house goes up in value, which good real estate has always tended to do.
C. great tax deductions that will lower your personal tax bill in many cases.
Example 2.
Use a $80,000 new business line of credit instead of your own CASH and buy 2 houses.
You may cash flow $200 per house per month for a total cash flow of $400 a month.
And you are making money on TWO pieces of investment real estate instead of one.
Your also getting -
A. Double the equity build up.
B. Double the appreciation.
C. Double the tax deductions.
AND YOU NEVER USED A DOLLAR OF YOUR OWN CASH. The entire down payment came from an unsecured new business line of credit!
