How to Use Real Estate Leverage to Build Wealth
Categories: Blog Posts
Building wealth as a new investor is all about using real estate leverage. But what exactly is it, and how can you use it correctly?
If you’re new to investing, it can feel a bit daunting. There is so much new vocabulary and things to learn, and it can very quickly become overwhelming.
One of the main terms you’ll hear seasoned investors use is “leverage.” Leverage is the idea of using other people’s money (mainly through loans) to turn a profit for yourself—to start building wealth.
Understanding leverage and using it correctly, is the key to unlocking the profits of real estate investing.
However, there are a few things to keep in mind to really maximize your success as a new investor:
1. Don’t let emotions take over your investing.
Investing is all about the numbers. Don’t give up when things are moving slowly, and don’t overextend yourself by becoming greedy.
Be strategic at every level—from the properties you pursue to the contractors you use.
2. Be persistent.
You don’t need $500,000 in savings to make your first deal. You just need to be a doer. This business is all about grit and follow through.
3. Look for the right leverage.
Not every loan is going to fit your needs. Once you have a property or project in mind, look for leverage that specializes in those areas.
Do you need DSCR? Have you considered the BRRRR strategy? What about hard money?
4. Run through examples with an expert.
Both at The Cash Flow Company and Hard Money Mike (our sister company), we want you to feel confident and educated.
One of the first things we do when new investors come to us is sit down and run through some sample properties. This helps you understand the different fees you should look out for.
Different areas have different fees, regulations, and options, and talking to an expert can greatly benefit you as a new investor.
5. Dive in.
The only way to start building wealth is to, well, start.
It’s typically easiest to begin with a straight-forward fix-and-flip. But be on the lookout for properties of all kinds. Check your area every day and get in contact with realtors or wholesalers.
As a new investor, it might take you a few tries before someone takes you seriously, but you need to go for it.
6. Commit to the business.
Real estate investing (even if you see it as a personal hobby) is ultimately a business. Don’t cut corners or only renovate with the cheapest fixtures. Every choice you make is an opportunity to build a good reputation.
Be thoughtful and hold yourself to a high standard.
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