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Using
Debt Wisely
Leverage:
"...a way of turning a small amount of force
into a much
greater force.."
Our
herd mentality will tell us that debt is bad.
How often were we told that we couldn't afford to
buy something unless we had the cash.
The fact is that by using the bank's money, we can
create our own personal wealth. Good debt
is 'the secret' the wise use to build wealth.
One
of the quickest ways to achieve your dreams is to
use the power of leveraging and acquire investment
properties. By borrowing funds to purchase a
property, one can effectively magnify its capital
growth, gaining sufficient equity more swiftly to
allow you to borrow further and repeat the process
many times until you have a substantial property portfolio.
For
example if you were to invest $10,000 in an asset
and that asset doubled it's value to $20,000, you
would make 100% on your investment. However,
assume you invested $10,000 of your money and borrowed
$90,000 to buy an asset for $100,000. If this
asset doubles it's value to $200,000, you would have
a gain of $100,000.
You
have now leveraged the $10,000 against the total investment
of $100,000 in order to make a 1,000% return.
This
is the principle of 'Leverage'.
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