I recently had a very interesting conversation with one of my fellow investor friends “Andy” (name edited) and it went as follows:

Chris: So Andy where are you investing now?

Andy: I haven’t done a deal in the past 12 months because I used up all my investment capital.

Chris: (I found it hard to believe because he told me he had over $350k of cash to invest) How many properties did you buy?

Andy: 2 and I bought them all with cash, no mortgage. (He said it with a sense of pride)

Chris: Really?  Why don’t you think about refinancing to free up more capital?

Andy: I don’t like borrowing money and I’m getting great return on my investment.  Almost 6% on my money.

I knew he didn’t know the rules of the game when it came to investing in real estate.  Real estate investing is the only investment vehicle that I can think of which you can put 20% down and control 100% of the asset.  You can’t do that with stocks, bonds and of course, mutual funds.  In other words, you can’t buy $1000 worth of stocks with only $200.  I know in stocks you can use options to control stocks but you don’t really own the stocks! You don’t have control over how it operates.  In another sense, I treat it more like gambling … gambling smartly if you know what you are doing.   

Instead, I want to invest smartly … that is why I choose to invest in real estate. If you recall my earlier posts, I mentioned how I enjoy using someone else’s money to invest.  Here are some of the greatest advantages when I borrow to invest in real estate …

1. The interest you pay on the borrowed money is tax-deductible.

2. Since you use less of your money, your return on your investment is far greater.

3. You can own more real estate with your money.

So going back to my investor friend, he can own at least twice the number of real estate properties and double the cash flow if he had borrowed money to invest instead of putting all of his money into the 2 properties!  

This is the power of leveraging!

If you want to know how to borrow intelligently and make money in real estate, please contact me and we can set up a free 30 minutes consultation.  I’d love to share with you my experiences!