Leverage

The lever. Potentially one of mankind’s greatest inventions, no? Ken over at ARRDPD brings up a good point about making investments with little or none of your own money. (His post was in response to this one). This is of course contrary to the traditional savings scheme taught to us by our parents via their parents.

First, to address Ken’s comment, I think most PF blogs are touting the traditional ways of raising capital for retirement. Those being: you work at a job, you save your money, you invest it wisely (and usually conservatively) and then you wait. and wait. and then retire.

This is why investing in real estate is so much more interesting because you have many more options available to you. You can leverage your own money to make larger investments. You can set up a corporation like Ken has, which lends money to investors and secures it against a property. You can start an investment group where you and your partners pool their money, then leverage it through the banks and invest in larger-scale developments. Either way, you are using other people’s money to make yourself more money!

In my scheme, I’m hoping to find investors who will accept a rate of return of say 10% on their money. I’ll then pool it all, and invest in as much real estate as possible (while ensuring my return is much higher than 10% because I’ll need a safety margin to guarantee interest payments/dividends). All the money will be kept inside the company, and reinvested… thus making all of investments more and more secure over time.

NLG

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