Yes! Because that’s what brings in the money, right? If you’ve seen the 1993 HBO original comedy Barbarians at the Gate, in one of the best scenes, the antagonist tells the main character that “debt can be a friend”, he’s basically talking about the power of leverage.
You pay at minimum, 5% downpayment and the remaining balance through mortgage, this will free up your cash on hand and increase the profit and growth of your real estate investments.
If you’re thinking of other alternatives to acquire more investment properties, we written down a few options that you might want to look into.
JOINT VENTURE FUNDS: This option is usually taken by savvy investors. Once they reach the point that they need extra capital to finance their investments, they turn to joint ventures to help fund it. In this kind of transaction, like-minded investors get together and pool their cash into one fund. The expert partners are the one tasked to manage all the work with a percentage of the net profit given to them together with some fees.
This kind of transaction poses risks so it is required that you perform due diligence on the operator and get your lawyer to manage and oversee all the documents.
PRIVATE MONEY AND VENDOR TAKE BACK: This option will cost you more in interest versus that off the traditional mortgage. You can take this route if and when the property owner grants you a supplement for your first mortgage-BUT-in return, the percentage in downpayment will be increased.
As with all investments, these transaction poses risks as well. You have to crunch the numbers and make sure that the net operating income of the property could manage the additional expense.
HOME EQUITY LINE OF CREDIT: It is possible to tap in the your homes equity but do make sure that the money coming out from the real estate investment can pay for the interest rates of the Home Equity Line of Credit and the property expenses.
For a line of real estate investments, check out the newest homes for sale in Edmonton.
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