BK Home Loans

2021 was a monumental year, but I could have never achieved this success without all of those who have instilled their trust in me and continue to promote me to their friends and family for any mortgage needs. As hard as I worked this past year, I plan to continue that momentum in 2022 with a passion to positively impact the lives of anyone wanting to build wealth through real estate.

Real Estate Leverage & Appreciation Explained
New investors may be asking the question, “What do you mean by leverage?” Simply put, leverage is a term used in real estate (or any type of investing) to describe the effect of borrowing money to purchase an asset (i.e. property). It’s the idea that you can buy a $100,000 property by investing only $20,000 of your own money. You are essentially “leveraging” somebody else’s (i.e. the bank’s) capital to buy the property.
When you combine the ability to use leverage in real estate with appreciation, you have an unbelievable money making combination. Let me illustrate with the example below (For the sake of this example, I’m going to leave out any cash flow calculation):
Let’s say you are able to buy an investment property for $100,000. Over the course of 5 years, the property increases at a rate of about 6% per year so that in year 5, the value of the property is worth approximately $134,000. Most people would nod their head and say 6% per year on an investment is fairly respectable.
However, if you are able to buy this property with leverage, your true return actually looks a lot better than 6% annually. Let’s say in this example you put 20% down or $20,000 to buy the property. Your $20,000 investment actually made an additional $34,000 (134K-100K) over the course of just 5 years. That’s approximately a 22% annual return for each of those 5 years! Why? Because while you only had $20,000 invested, you had the benefit of the entire asset increasing in value, not just the dollars you had invested.
(And again, this example doesn’t even include the returns generated by renting the property!)

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Scenario: Comparing 401k returns vs. real estate returns
What happens over a 10 year period with your money invested in real estate vs. a 401k?
Real estate offers the ability to factor in leverage. In a 401k your ROI percentage is calculated on the value of your overall cash portfolio. What does that mean? That means that if you have $50,000 in a 401k and your are earning 10% per year, you are earning $5,000 in interest on your money. However in real estate you may put $50,000 as a down payment into a property that is worth $500,000 and with an average appreciation of 3%, you are earning on the overall value of the property not just your cash value. 3% on a $500,000 property is $15,000 per year. In essence you are buying a bigger bank account to earn appreciation and interest on.
There is a lot more details to compare. DM me with your questions!

Don’t think you have to go at it alone. I’m here to help you every step of the way find the right deals for your situation.

I'm all about helping my followers achieve financial freedom. Follow along and get all my hottest tips and advice.
I'm online right now! DM me about any questions you have - I'm here to help!
Or contact me anytime - Email: [email protected] . Phone: (602) 622-1145

Real Estate investing can be far greater than stocks for a lot of reasons. But one of the most important is the power of leverage. Let me explain.

Although there are fluctuations in short term markets real estate appreciation is roughly 3-4% on average year over year but that is on the value of the property not just the value of cash you have in it. Unlike investing in a business or stocks for example, real estate earns builds you wealth on the amount you borrow as well.

That's why I prefer real estate over stocks. If you were to put 10k into buying stocks and it appreciated at 7.74% in 2.6 years, you would only get about $2000 in interest. But if you put 10k as a down payment on a $300,000 property, and that property appreciates at 3% - you earned $9,000 in equity.

This is called leverage. You are buying a bigger bank account that will appreciate when you buy a house.⠀

You need a partner to help guide you through market cycles and determine the best times, and areas to buy investments. Contact me today and let’s discuss the current market conditions and areas that are seeing the strongest growth for your next investment.

Don’t think you have to go at it alone. I’m here to help you every step of the way find the right deals for your situation.

I'm all about helping my followers achieve financial freedom. Follow along and get all my hottest tips and advice.
I'm online right now! DM me about any questions you have - I'm here to help!
Or contact me anytime - Email: [email protected] . Phone: (602) 622-1145