How To Finance An Investment Property
The secret in real estate business is to use other people?s money. This is how most real estate tycoons are made. Unlike traditional residential real estate mortgages, real estate financing offers much broader financial options, including lending or financing from various financial institutions. Transactions like these call for above-average negotiation skills.
It's not advisable to invest your own money in a real estate as for a few very important reasons. First, you you tend to give most of your profits away by not leveraging your investment. Second, real estate is a very risky business ? you don't want to jeopardize everything you have.
This is not to say that real estate investment is all about losses. On the contrary. if you know how to make money work for you, you may actually garner a great deal of money in return for your investment.
Here?s how:
If, for example, you purchase a $100,000 property that increases an average of 7 percent per year (in reality that number could be higher or lower), you would see a net profit from renting your property resulting in an approximately 15 percent return.
If you're content with little return of investment, you might settle with your 15 percent return. But if you really want to earn on your investment, consider the possibility of what leveraging can do for you. At present, a typical real estate investor can find financing as high as 95 to 97 percent of the purchase price. There even some instances where you may be able to get a 100 percent financing but we won't use this for our example as it's an inadequate comparison.
So, if you're are an investor who is already content with a smallreturn of investment then 15 percent sounds like a lot. But for those who really want to make it big in the real estate, 15 percent is far from being considered a noteworthy return.
How does leveraging work?
Let's assume that the rental income will cover all your expenses, including the mortgage payments. Taking the same example, a 7 percent appreciation of your property results in a $7,000 profit per year. With a 95% financing in place, you'll be able to get a $7,000 return on $5,000 (your 5 percent down payment on a $100,000 real estate property). This will provide you with a 140 percent return on your investment. Not only that, with the same $100,000 you can go out and purchase 20 investment properties, finance 95% percent of them, and make an amazing $140,000 profit a year. This totally beats the $15,000 profit with an all-cash transaction.
In terms of the additional 20 properties, expect to have a hard time getting financing for them since usually only five or six new rental property mortgages are the maximum that lenders presently allow. Which is why you need to have an above-average negotiation skills.
Article written By Stu Pearson.
Author Bio:: ------------
Stu Pearson
http://www.comprehensivewealth.com
http://www.comprehensivewealth.com/default.aspx
email: jupita_fanklin12@yahoo.com
Related Articles:
Mortgage Advisers And Overseas Property
The foreign property market has become an obsession with British investors in recent years and mortgage advisers have reaped the benefits While France, Spain, and Portugal have long been favourites with retirees and investors alike, new markets in Eastern Europe have emerged and tempted many Brits
Could You Have Unclaimed Property?
It sounds too good to be true, but the fact is that there are billions of dollars in unclaimed property across the country just waiting for the rightful owners to come forward and claim it. Most people think they have a pretty good handle on their assets, but each year, in each and every state, millions of dollars that have been sitting idle revert back to the state. Many times it?s simply because the owner has moved or changed marital status.
Insurer FM Global Makes Its Premium Risk Prevention Data Available at No Cost for First Time in 170 Years : Release of unique source of property pro
For the first time in its 170-year history, FM Global, one of the world?s largest commercial and industrial property insurers, today announced its decision to release thousands of pages of its previously exclusive property loss prevention engineering guidelines at no cost through its Web site www.fmglobaldatasheets.com.
CB Richard Ellis Reports Asian Industrial Property Markets Remained Largely Upbeat In The First Half of 2007
The second quarter continued to record upbeat performance in most of Asia's industrial property markets, buttressed by sustained growth in the manufacturing sector and robust demand in logistics facilities. Industrial land prices in China appreciated further following the establishment of a system of minimum industrial land prices and the implementation of mandatory use of market mechanisms in the primary sales of industrial land.
Yew Git Off My Property! The Law Of Trespassing
CYA Disclaimer: The following is intended for reference purposes only and not as legal advice.
IBM Grants Water-Cooling Intellectual Property License to Vette Corp: Enables Collaboration to Provide End-to-End Solutions for Data
Center Cooling
IBM (NYSE: IBM) and Vette Corp ("Vette"), a global provider of thermal management solutions, today announced a series of agreements for Vette to license IBM's Rear Door Heat eXchanger water-cooling technology. In addition to increasing access to the IBM CoolBlue(TM) portfolio of technologies, the agreements provide a path for the development of additional products that both companies plan to offer to meet the growing need for diverse high-density cooling solutions.
How To Make Money With Investment Property
Owning investment property can be a profitable endeavor, even for the neophytes in the field of real estate. The crux of the business lies in finding affordable investment property that is likely to be lucrative. Although there are scads of books, guides and other online sources of information, loads of advice at the outset can often leave a newbie investor perplexed as to what?s the right road to follow. It?s best to know the basics first, and then move on to the avant-garde tips and tricks of the profession.
Buy & Sell Hot Property in Gurgaon
Gurgaon?s property market seen a frenzy trend and is being driven largely by the rapid expansion of its information technology industry and the simultaneous growth of its middle class. Now trend to buy and sell property in Gurgaon reached a new height with the improvement in infrastructure face lift in the last few months. Proposal for investment of four thousand cores in coming few years to strengthen infrastructure by Haryana government gave the booster dose to Gurgaon property market. Gurgaon property is now become hotter then ever. If you are looking to invest in Gurgaon property market then put your esteemed faith in capability of surajrealtors. Your dreams to buy and sell property in Gurgaon is going to be a right business decision as...
Job.com Ranks as Top Gaining Property on Entire Internet
comScore Media Metrix's monthly analysis, reveals fast growing, Job.com to be a top gaining Internet property in the month of June.
Vacation Rentals: How to Travel With Kids
You will find yourself again and again thinking about the thought of traveling with kids, but you will get lots of ways to maintain it stress-free, providing, you find out how to plan vacation well You want to take following tips in consideration in order that you can have great family holiday