Leverage and why it is so important when investing in property

Thursday, 28th May 2015

Why is leverage so important when looking to invest in residential property?

Residential property is one of many asset classes you can borrow against. It’s the power of leverage that is the reason we choose residential property in the first place.

You require a cash deposit or equity to purchase a property. The true power of leverage comes from our banking system. It’s the bank’s ability to let us borrow money against a property. Depending on the type of residential property and where it is in Australia, banks/lenders will let you borrow up to 80%, 90%, or even 95%.

Leverage is simply the amount of money one will lend you against the asset you are using. As many a wise person said, I would only invest in ‘bricks and mortar’. It is for this reason our ability and capacity to leverage, or borrow money, is significantly increased.

Lenders and banks prefer to loan against ‘real assets’ (property) than any other asset class. That’s why we love property.

If you have a question or would like to know more about leverage you can download our ebook why property, join us at our next seminar or contact me, I would love to talk to you peter@investoproperty.com.au