Leveraging in Property Investment Basic of Property Investment | Investment Property Melbourne

October 31st, 2023

One of the key benefits of property investing is the ability to leverage other people’s money. Rather than funding the entire purchase price yourself, you can use the bank’s money to buy assets worth far more than your own deposit. In this guide from Empire 8 Property, we’ll break down how leveraging magnifies your investment exposure.

Accessing Funds Beyond Your Personal Capital

Let’s say you find an investment property worth $500,000 that meets your criteria. To buy it outright with all cash, you’d need the full $500,000. But through leveraging, you can gain control of a $500,000 asset with a much smaller deposit like $80,000, or even less.

The bank provides the remaining funds required through your mortgage loan. This gives you control of a significantly more valuable asset than you could access with your own capital alone.

Maximizing Growth on a Larger Asset Base

Now your investment earnings occur on an asset worth the full $500,000 purchase price, rather than just your $80,000 contribution. This magnifies your potential upside.

If the property value increases 7% annually, that 7% growth applies to the whole $500,000 leveraged amount, rather than the $80,000 you personally provided. This boosts overall investment returns.

Appreciation Is Yours, Not the Bank’s

An additional benefit is that any appreciation or rental income belongs to you, the investor, not the lender. You enjoy full upside on the larger leveraged asset, while only putting a fraction of your own equity into the deal.

The bank merely provides funds in return for interest payments on the mortgage. The remaining gains are yours.

Let Us Strategically Leverage Your Investments

Used astutely, leveraging grants individual investors access to substantial assets and upside potential. To explore strategic financing for your goals, contact Empire 8 Property at 0433 213 993 or click here to schedule a consultation. Our experts help maximize returns through smart leveraging.