Much has been said about real estate and its wonders. But do you really know the real score on how it creates wonders for your money? After all, different people hold various opinions on how much good do leverage and OPM (other people's money) have.
The first thing you must remember is that your team of experts demands an equally competent mortgage professional. Depending on your goal and current situation, the scheme to acquire financial success may vary. The following examples present scenarios but they may or may not suit your specific situation.
In achieving your financial goals, we can look at some options you can consider. The best thing here is that you are in control when it comes to real estate. To start with, let's say you have $20,000 as a principal. If you are eyeing a $100,000 worth of property, you can deposit a 10 percent down payment. Alternatively, you can put in a 20 percent down payment for a $200,000 property. The rest is for you to decide.
There is no right or wrong answer; again, it depends on your goals, but let's look at the differences. Whenever you make a large down payment it is more likely that you will be able to get cashflow because your mortgage payments will be lower and at the 20% mark you do not need mortgage insurance. So if cashflow is what you desire, larger down payments help you achieve that.
We'll also assume that the appreciation is 6% for both the $100K & $200K homes. (In reality the appreciation rate could very well be different for each if located in different markets or if property types vary, like a single family home vs. a duplex. We'll ignore these differences for this article). That means after one year of appreciation the $100K home will now be worth $106,000, while the $200K home will now be worth $212,000.
The amount of appreciation for both properties ($100,000 and $200,000) obviously doubles itself year after year. All these and more, but you would not be spending any thereby saving yourself some serious bucks!
In no time at all, savvy investors like you will have enough to get you some equity and you can eventually purchase another property. The MORE properties you have working for you, the better the effects of appreciation will be. What are you waiting for? There will be some limitations in paying a lower percentage down payment though such as additional maintenance costs. But those are minor issues if you compare it to the long-term benefits it promises.
Moreover, you get more advantage since debt payments and maintenance costs are tax deductions (using leverage or OPM and getting less monthly cashflow) unlike cashflow that is taxable. In the case of some people who needed monthly cashflow - the solution is simple, your approach can be modified to get what you really wanted. Besides, most people would agree that extra payment every month realizes wealth building benefits in the future!
The choice is yours! Build your team of experts to help you make the right decision. - 15224
The first thing you must remember is that your team of experts demands an equally competent mortgage professional. Depending on your goal and current situation, the scheme to acquire financial success may vary. The following examples present scenarios but they may or may not suit your specific situation.
In achieving your financial goals, we can look at some options you can consider. The best thing here is that you are in control when it comes to real estate. To start with, let's say you have $20,000 as a principal. If you are eyeing a $100,000 worth of property, you can deposit a 10 percent down payment. Alternatively, you can put in a 20 percent down payment for a $200,000 property. The rest is for you to decide.
There is no right or wrong answer; again, it depends on your goals, but let's look at the differences. Whenever you make a large down payment it is more likely that you will be able to get cashflow because your mortgage payments will be lower and at the 20% mark you do not need mortgage insurance. So if cashflow is what you desire, larger down payments help you achieve that.
We'll also assume that the appreciation is 6% for both the $100K & $200K homes. (In reality the appreciation rate could very well be different for each if located in different markets or if property types vary, like a single family home vs. a duplex. We'll ignore these differences for this article). That means after one year of appreciation the $100K home will now be worth $106,000, while the $200K home will now be worth $212,000.
The amount of appreciation for both properties ($100,000 and $200,000) obviously doubles itself year after year. All these and more, but you would not be spending any thereby saving yourself some serious bucks!
In no time at all, savvy investors like you will have enough to get you some equity and you can eventually purchase another property. The MORE properties you have working for you, the better the effects of appreciation will be. What are you waiting for? There will be some limitations in paying a lower percentage down payment though such as additional maintenance costs. But those are minor issues if you compare it to the long-term benefits it promises.
Moreover, you get more advantage since debt payments and maintenance costs are tax deductions (using leverage or OPM and getting less monthly cashflow) unlike cashflow that is taxable. In the case of some people who needed monthly cashflow - the solution is simple, your approach can be modified to get what you really wanted. Besides, most people would agree that extra payment every month realizes wealth building benefits in the future!
The choice is yours! Build your team of experts to help you make the right decision. - 15224
About the Author:
Author: Alexandria P. Anderson is a MN real estate agent that specializes helping people to find and purchase Minnesota Land, as well as Minnesota property for her realty clients.
