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If I have $50 to $100,000, how should I invest it in real estate?
Now, the dollar amount here doesn’t matter so much. It could be $20,000 or $200,000. What matters is answering the question of what your goals are, and what’s going to help you get there quicker and smarter. We want to get that football down the field further, and there’s something here that can help us get there, leverage.
There are those out there that say you should never buy rentals with leverage, with getting a loan. You should pay cash for it. I respect that, and I think that can be helpful, but you can get so much more if you use the power of leverage and you use it wisely and not over-extending yourself, making sure that you can cover the bases here.
How much leverage should we look at? Of course, you can look at some of my other videos on the topic that discuss leverage, the power of leverage, gives some examples. What we recommend though for a typical rental property is 75 to 80% leverage, so you’re putting 20 to 25% down on that property. And the reason for that, sometimes 75% leverage will give you a better interest rate on that property. You might get another quarter to even a half a point better interest rates. You may want to look if you’ve got the cash, it may be worth doing that.
What we recommend is you can use some of our financial sheets on our website and other places that run a proforma on a specific property and put in different down payment amounts to see what your cash return would be if you do it all cash, partially leveraged, and just run some different scenarios so you can get a better educated idea of what you should do.
The question is how many can I buy? That’s really what the question is, and you have $100,000 and you’re looking at $200,000 properties, well, you could put 50% down, or you could put 25% down and have two properties that are being leveraged at the same time. And that’s what we recommend is to look and see how far you can go, how you can get that ball down the field further and smarter and wiser. If you have questions about this, if you’d like us to help you find rental properties that you can buy, or you have some that you’d like to have managed so you can be the investor, let us know. Reach out to us. We’re more than happy to help out.