returns.
Example, suppose that you purchased a home for 0k, for which you made a 5% deposit down (k). During the next few years the house appreciates in value and you sell it for 0k (10% higher than the level you purchased it). Though the return on the house is only 10%, the return to the investor based on invested funds sunk into the home (k) is 200% (k earned over k investment) – that is the power of leverage. On the negative side, more debt means higher fixed monthly mortgage payments; thus, higher risk of being able to make the monthly mortgage payments. As long as cash flow is not a concern and the mortgage payments can be met – investments should be leveraged to maximize returns to the investor. Could you imagine walking into a bank and asking for 0k to invest in equities while only putting 5% down – likely to never happen, this is a major benefit of real estate ownership.
Inflation Resistant
Real estate holds its value during inflationary periods; thus, acts as a hedge against the investors other assets that aren’t protective against inflation (ex. Currency). The asset will continue to hold
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