We are now living in a “cash economy” especially in regards to the real estate market. A few years back real estate investors fueled the escalation of home values as credit was available to anyone who could fog a mirror.
Not anymore. Think about this:
Financial leverage allows buyers to magnify their returns by using credit to borrow on house acquisitions. Leverage also magnifies the risk as many well intended investors found out.
It’s simple: Leverage magnifies risk and there is no reason to do it in today’s plethora of real estate opportunities.
If you want safety – pay cash for well located houses that can be bought, rehabbed and managed by a professional company.
Our country has turned into a debtor country and our society is a debtor society. Most people outspend their income through the use of credit cards, equity lines and mortgages. We are slowly seeing some of this slip away as credit is no longer available like it used to be. For most people, that’s about the only way they could control frivolous spending.
When you buy a well located house for cash a few things happen:
- You have safety
- You have cash flow – usually double digits
- You still have depreciation to increase your returns
- If you bought right, you have equity
There is no substitute for SAFETY as it gives every investor peace of mind. A steady program for investing with this mind set will help keep you safe and your overall returns will be significantly better than other investments available to you that don’t allow leverage.