 | |  | |  | |  | |  | |  | |  |
Using Leverage - Other Peoples Money
| Leverage is defined here as The use of credit or borrowed funds to improve one's speculative capacity and increase the rate of return from an investment. Leverage or what we will call other peoples money (OPM) is often used to increase profit on a property purchase. Say you want to buy a property for $100,000 that will give you a net operating income (NOI) of $15,000 per year. You will make a profit of 15% return on your investment. Not shabby. However, if you invest $20,000 and borrow $80,000 at an annual cost of $7,000 then the cash in your pocket at the end of the year will be $15,000 - $7,000 equalling $8,000 profit per year. For your initial investment of $20,000 your return for the year will be 40%. That is leverage. You can see the advantage of leveraging a deal. If you have questions please call me JW Najarian 818-353-9100 For a great article on OPM Click Here |
| All Rights Reserved |
(818) 353-9100 Office
(818) 353-7262 FAX
(818) 353-7262 FAX
| Emerald Bay Investments JW Najarian Commercial Real Estate Investor |
