Things cost you what they cost, right? That much seems obvious. If you want to buy 1000 dollars worth of stock, you’re putting 1000 of your own dollars out of your own pocket into that investment. There’s no getting around it - stocks, bonds, mutual funds, gold… whatever your investment is, you’re going to have to pay what the full price of what the market asks of you.
Except, that’s not the case with real estate. When you purchase a property, a bank will typically finance between 75 and 85 percent of the cost. Your responsibility is only for the remaining percentage, which you put in as a down payment. And yet, 100 percent of the investment (the property) is under your control.
A bank would laugh at you if you asked them to cover 85 percent of the cost of a few ounces of gold. Or if you asked to borrow 80% to buy their own stocks! But if your investment is in real estate, they’re singing a different tune. If you have good credit and are able to make that 15-25 percent down payment, the bank will cover it.
Banks love helping people invest in real estate, which also tells you they consider it low risk. By having a bank finance the vast majority of the cost of the investment, investors can minimize the amount of money they have to put into the deal. This gives you a greater return on your investment. Plus, you aren't sharing 75-85 percent of the profits. And remember, real estate has many profit centers!
There are so many possibilities at every step of the way, from the leverage and instant equity we can find when you initially purchase the property, to the profits we make from renting out units, to the value the property gains, all the way out to the potential for reinvesting the money you’ve made off a property. That’s the versatility of real estate, and it all beings with making that initial investment.
The simple fact that a bank will be willing to finance an enormous part of the cost of a real estate investment, while still allowing the investor to reap all the rewards, is part of the reason real estate is such a great choice. With the help of a bank, investors can minimize how much of their own money they have to spend, while maximizing what they’re able to make in profit. You don’t have to dump all of your own money into the transaction - the bank can help make it happen. What’s not to love about that?
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