5 ms·

That's why most real estate investors get mortgages. Then your ROI depends on the money down. Real estate investments benefit from leverage.

• kolbe 5y ago
  And then instead of risking the value of the investment, you risk 5x it? That's a completely different risk profile from the listerine royalties. What's the listerine yield if you lever it 5:1?
  • ricardobayes 5y ago
    No, your risk is the mortgage, but it's paid by the lesee. Most people I know do it by putting down 10%, getting a 30-year mortgage for the rest, then rent it out. Eventually the property pays for itself. Let's take an example: a 100k fixer upper. You put down 10k, finance the rest. You spend 25k on remodeling it, so you can rent it out. The house brings in say 850 a month, making cca. 10k a year. So you make 10k a year on a 35k investment, which is a 28% ROI. Obviously before taxes, and any mainteneance etc. But this is how most retail real estate investment work.
    • kolbe 5y ago
      10k/year on a property with a market value of 125K is a far higher cap rate than I see to begin with, but I live in a nicer area where a room in a house is the only thing you can get for less than $1000. I know there are much higher yields in Section 8 and slumlording, but that's more of a business than an investment because of the extra work involved, and one where I hear success requires a moral compass that I don't align with.
      • ricardobayes 5y ago
        I agree with the jist of your comment, however providing section 8 housing is as good as one can do to help low income families (in my opinion).