When you acquire investment property, there is something very crucial that you must use in order to become successful - LEVERAGE.
If you think that you can do it without help, it is going to be a very slow and painful way up. Sensible property investors consistently leverage on other people's time, know-how and most crucial of all, money, to build up a portfolio of investment properties that continue to generate income for them.
The fastest way to leverage is by means of a bank loan. Let's keep things conservative and assume that your investment property is valued at $100,000. If you were to pay cash for it, you will have to produce the $100,000 on your own. Whereas, if you were to take up a bank loan, you probably only need to produce about $10,000 and borrow the rest of the money. And then you rent out the investment property and your tenant will pay off your bank loan.
Just imagine if you were to buy an investment property valued at $1 million or more. How are you going to produce that kind of cash?
One more reason to use a loan instead of having to pay the full price of the investment property is that subsequently, if your investment property appreciates in value, you would have made a huge income. If the investment property appreciates in value by 10%, you’re able to sell it off at $110,000, therefore you profit by $100,000 given that you only paid $10,000 as the deposit and borrowed the balance. Now compare that to if you paid cash for the investment property. Your total profit would only be $10,000 which is the sum that the investment property appreciates in value.
Naturally this is a very straightforward equation, but in the real world, you still have to factor in other things like prices, interests, legal charges and other miscellaneous fees that the sale and purchase of your investment property will incur.
Yet another way to leverage is with other people's abilities. This is where participating in a team can really be beneficial. Intelligent property investors always network with other property investors. Often, they contact developers together as a team and see if they can pick up good deals. With more people in a group, they can each contribute something to the table and be able to make better choices when it comes to identifying investment properties to acquire.
Furthermore, not everybody will have the available free time to go browsing for investment properties. So they can send a few people from the group to go investigate the property and see if it meets to their expectations. This is also where other people's skills become useful. You may not be familiar with the neighborhood where you wish to buy your investment property really well, but somebody else on your group may. You may think that the surroundings looks good but your group member may think otherwise because he or she recognizes something that you don't.
This is how excellent property investors can to accumulate a substantial pool of investment properties in a short period of time.
Milan Doshi offers his insights on savvy property investment and shares his strategies to retire in 5 years by accumulating at least RM3 million good debts through his Property Intensive Seminars organized by Wealth Mastery Academy Sdn Bhd. For updates on any of his upcoming speaking engagements, like our Facebook page https://www.facebook.com/wealthmasteryacademy
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