Leveraging is a common practice of many sophisticated investors in many different areas. In the stock market, investors typically use leveraging to gain more equity and value in a company they invest in and to make more money, of course. Leveraging is simply using someone else’s money to increase your assets and eventually your profits. In real estate, leveraging is done smoother and with less risk than in the stock market. So, today we will talk about leveraging in the real estate market.

Real estate leveraging is a practice of a buyer using the banks money to make more money for themselves. For instance, John goes to a bank to get approved for a mortgage to buy a new house for himself. Let’s say John puts $50,000 down as his down payment on the property but the house cost $200,000. This means the bank pays the rest of the missing $150,000 for the house. Now let’s say after 5 years of living and maintaining the house John puts the house up for sell, and sales it for $300,000. So the value of the house increased by 50%, which is extremely good and not unusual, but not always typical either but it’s used for the strength of this example. So, the property being sold at 300K means John’s initial investment of only 50K increased by 200% at a total of $150,000. This example is given to show you the power of leveraging. Now understand leveraging is a sophisticated investors tool and shouldn’t be taken lightly because it’s a huge gamble. Although, real estate leveraging is less risky than stock market leveraging; it’s still an enormous gamble nonetheless. So, apply leveraging at your own risk and discretion.

Lastly, I point out to our sophisticated investors that the time to leverage in the real estate industry might be now. With a fluctuating economy, mortgage rates staying idle for now, until the Federal Reserve prepares to increase them; along with home prices staying relatively stable this could be the time to take advantage. Invest in a property by leveraging the bank’s money and when the economy & housing industry comes roaring back, cash in on your investment.