Create Wealth through Leverage, Building Wealth, Wealth Creation, Wealth Planning, Wealth Advisors

Wealth through Leverage

Leverage is financial muscle in investing terms.  It gives you the ability to stretch the money you have to invest, therefore, supercharging your gains.

In property terms when you are starting out you should aways look to borrow the most amount possible, giving you greater leverage and supercharging your wealth creation.

For example, if you have $100,000.00 to invest in property you could borrow -

80% of the value of a $400,000.00 property (which is an 80% LVR or Loan to value ratio) therefore tiping in a 20% deposit ($80,000.00) + 5% in costs (Stamp duty and legals $20,000.00) totaling $100,000.00. 

Using this example $100,000.00 would purchase you a $400,000.00 property.  If you use an average of 10% growth on that property you would receive back (in growth) about $40,000.00 on you initial investment or 40% return.

If you had the same $100,000.00 investment (still using the investing in property model) and you borrowed 95% (which is a 95% LVR or Loan to value ratio) therefore tiping in a 5% deposit ($20,000.00) + 5% in costs (Stamp duty and legals $20,000.00) totaling $40,000.00.  You will find that if you use an average of 10% growth on that property (as above) you would recieve back (in growth) about $40,000.00 on you initial investment or 100% return.

That is leverage, and that is financial muscle.

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