We all use leverage as a strategy to maximize our assets, own more property, and have greater cash flow. Investors use retirement accounts, savings accounts and mortgages as leverage, to own income property.
Low interest rates make it possible to buy properties on terms that will produce immediate profits. However, banks are unfriendly to investors, hard money is available, but they have higher rates.
New investors starting out must rely on fix-up job profits in order to acquire the next project. Borrowing for a down payment or to payoff rehab debt can make good sense. What does not make good sense is borrowing more than you need, just because you can. That turns the property into a money pit not a money maker!
Borrowing has little to do with profit-making. It has more to do with increasing your debt. However, without cash you cannot move forward; therefore, your investing would be stopped. The primary cause of investment failure is that the investor goes into negative cash flow for a period of time that is not sustainable. This results in having to sell the property at a loss or go into insolvency. It is essential to have a good plan and stay within your means financially. Just remember, cash flow is good. The opposite is not.
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