All About Real Estate
We all know what real estate is all about. It’s about land, buildings, houses, offices, shops, warehouses and so on. Real estate is a very powerful way to invest as it is one of the few businesses you can extensively use other people’s money (OPM). Let’s put it this way, if you go to a bank to borrow money to invest in shares or in companies listed on the public stock exchange market, chances are you will be declined or you will have to provide lots of guarantees in order of approval. However in the case of real estate, if you ask a bank for a loan you are certain for approval. Of course, this is subject to adequate circumstances. Now, why will they approve? It is because you can leverage your investment, and it is because you are using other people’s money. We’ve mentioned the bank, but it doesn’t necessarily have to be. It can also be investors.
Investing in Real Estate
When looking to make an investment in real estate, we are looking at ROI, which is return on investment and also infinite returns. Return on investment, is how much you have invested and how much you have in return. Be it positive or negative, it is the yield of your investment. Here is an example, say you want to invest in a property. You put down a deposit of 30% of the value, and the rest is a loan where you get to keep 100% of the cashflow. Hoping that your cash flow is positive, you will pay your mortgage, insurance and any other expenses. What is then left, is your profit, and this is how you start building your passive income.
On the other hand, we have infinite returns. Simply explained, infinite returns is when you do not have any money of your own invested while still generating an income. For example, you want to invest in a property that requires £100,000. Your bank loans you £80,000 and the rest £20,000 is financed by other investors. You’ve come to an agreement with them for a repayment schedule with a level of interest. Your deal is done, you have invested in real estate with other people’s money. Now, whatever is left from the cash flow after paying property expenses, insurance, mortgage and investors, will be your cash flow. This cash flow will be infinite, and this is because you have not invested any of your own money
Real Estate is a Powerful Investment
Like we’ve mentioned before, investing in real estate is one of the few lines of business you can invest with other people’s money. There are two ways in which you can invest. One is by investing your own money as well as getting a loan from the bank, which will then have you looking at your ROI return on investment, and help you build your passive income. Then you have infinite return, where no money of your own is invested but the one from the bank and investors. Once agreement of repayment schedule to investor, paying all property expenses, insurance and mortgage, the cash flow will be yours.