How to grow a small amount of money into a large sum of money using leverage.

Here is the scenario:

You put down \$10,000 to borrow \$100,000.

With \$100,000, you buy a \$70,000 property and put \$30,000 into repairs.

The repairs could add 25% in “after repair value”.

With an ARV of \$125,000, you sell the Property.

You pay back your loan of \$90,000 and interest at 6%, \$5,400, totaling \$95,400.

\$125,000 - \$95,400 = \$29,600.

After paying yourself back \$10,000 and paying 6% realtor commission of \$7,500, Your net profit is \$12,100.

Therefore, you earned \$12,100 on a \$10,000 investment.

That is a 121% return on investment!

If an investor used cash to buy a \$100,000 property, as in the last example:

The \$12,100 profit from the previous scenario will increase by \$5,400 to \$17,500 because there will be no interest on borrowed funds. The investor earned 17.5% on investment.

Continuing the last two examples:

If an investor had \$100,000 in cash, and put \$10,000 down to leverage ten properties, the investment would look like this:

\$12,100 x 10 = \$121,000.

That’s a 121% return on investment. Most important, using leverage, the investor used his cash to earn \$121,000 instead of only \$17,500 if he had paid \$100,000 for just one house.

The same \$100,000 in cash could earn \$17,000 without leverage or \$121,000 with leverage.

If the investor rolled over the profits, in year two, the investor will have \$221,000 in investment capital. [Original \$100,000, plus \$121,000 from year one earnings.]

The end of year two could look like this:

\$221,000 enables the investor to put down \$10,000 on twenty-two properties.

If as in the previous scenario the investor earned \$12,100 profit per each property,

\$12,100 x 22 = \$266,200.

In two years the original \$100,000 in cash grew by \$266,200!

Investor now has \$366,200 in investment capital.

Let’s see what happens at the end of year three if the investor rolls all the money.

The investor will have \$266,200, plus the original \$100,000 for a total of \$366,200 investment capital.

\$366,200 divided by \$10,000 = 36.62.

This shows the investor could fund thirty-six projects.    36 x 12,100 = 435,600.

In three years the original \$100,000 grew by \$435,600 to \$535,600.

Therefore, the investor cannot do this alone. There are too many properties to evaluate and too many renovations to perform.  The investor needs Property Redemption Services to make it all happen.

Rentals vs flipping

Some investors think all they need to do is buy a house and rent it out.  They think all they must do is hire a property management service and sit back and watch the money roll in.

Let’s take a closer look.

Staying consistent with the previous examples, let’s say an investor bought a \$112,500 house, using \$10,000 down payment.

[A \$101,250 home loan balance with an average interest rate of 6.0% paid over a 15 year term will have a monthly payment of \$854. In total, the loan will cost \$153,793 with \$52,543 in interest.]

The rental income would be \$1,000 a month.

Now subtract:

\$300  taxes

\$75    insurance

\$50    water - stays with house.

\$854  mortgage

\$100  property management

\$50   maintenance

\$1,429 total.

Every month you are losing money!

Even if you received \$1,429 monthly rental, which you will not, you still earned nothing, but you are exposed to risk and renters destroying your property.

If you need to evict, you will have months of lost rent, legal fees and expense of repairs to prepare for new tenant.

Every time you get a new tenant the preparation and repair costs eat up your profits.

If you paid cash for the rental property,

you will have tied up \$112,500.

Your monthly cost will be \$575.

That leaves a net of \$425.

\$112,500 divided by \$425 = 264

Break-even is 264 months

22 YEARS to break even!

Property Redemption Services

makes finding the right project easy.

PRS has a list of pre-screened properties in which to invest.

You may buy the property in full or joint venture with others.

The team of tradesmen to perform the repairs and renovations is already in place.

Remember – "It’s not how hard you work that counts, it’s how smart you work."

Join Property Redemption Services,

it’s the smart choice.

WAIT!

Let’s back up.

Let’s say you don’t have \$100,000 to invest in ten properties.

How do you get to that point?

Starting with \$10,000, using leverage, at the end of year one you earn \$12,100 + your original \$10,000.

You now have \$22,100.

Year Two - You invest in two projects.

\$12,100 x 2 = \$24,200 + your original \$22,100, totaling \$46,300.

Year Three - You invest in four projects.

\$12,100 x 4 = \$48,400 + your original \$46,300, totaling \$94,700.

Starting with \$10,000, in three years you could escalate to investing in almost ten projects as reflected in the example above.

Year Four - You invest in nine projects. \$12,100 x 9 = \$108,900 + your original \$94,700, totaling \$203,600

FAST TRACK

If you borrowed \$100,000 at 10% interest.  You would pay \$10,000 per year in interest.

\$100,000 could enable you to invest \$10,000 in ten projects.

If ten properties enabled you to earn,

\$12,100 x 10 = \$121,000,

does the \$10,000 interest really matter?

Back

Rentals vs flipping

Some investors think all they need to do is buy a house and rent it out.  They think all they must do is hire a property management service and sit back and watch the money roll in.

Let’s take a closer look.

Staying consistent with the previous examples, let’s say an investor bought a \$112,500 house, using \$10,000 down payment.

[A \$101,250 home loan balance with an average interest rate of 6.0% paid over a 15 year term will have a monthly payment of \$854. In total, the loan will cost \$153,793 with \$52,543 in interest.]

The rental income would be \$1,000 a month.

Now subtract:

\$300  taxes

\$75    insurance

\$50    water - stays with house.

\$854  mortgage

\$100  property management

\$50   maintenance

\$1,429 total.

Every month you are losing money!

Even if you received \$1,429 monthly rental, which you will not, you still earned nothing, but you are exposed to risk and renters destroying your property.

If you need to evict, you will have months of lost rent, legal fees and expense of repairs to prepare for new tenant.

Every time you get a new tenant the preparation and repair costs eat up your profits.

If you paid cash for the rental property,

you will have tied up \$112,500.

Your monthly cost will be \$575.

That leaves a net of \$425.

\$112,500 divided by \$425 = 264

Break-even is 264 months

22 YEARS to break even!

Property Redemption Services

makes finding the right project easy.

PRS has a list of pre-screened properties in which to invest.

You may buy the property in full or joint venture with others.

The team of tradesmen to perform the repairs and renovations is already in place.

Remember – "It’s not how hard you work that counts, it’s how smart you work."

Join Property Redemption Services,

it’s the smart choice.

WAIT!

Let’s back up.

Let’s say you don’t have \$100,000 to invest in ten properties.

How do you get to that point?

Starting with \$10,000, using leverage, at the end of year one you earn \$12,100 + your original \$10,000.

You now have \$22,100.

Year Two - You invest in two projects.

\$12,100 x 2 = \$24,200 + your original \$22,100, totaling \$46,300.

Year Three - You invest in four projects.

\$12,100 x 4 = \$48,400 + your original \$46,300, totaling \$94,700.

Starting with \$10,000, in three years you could escalate to investing in almost ten projects as reflected in the example above.

Year Four - You invest in nine projects. \$12,100 x 9 = \$108,900 + your original \$94,700, totaling \$203,600

FAST TRACK

If you borrowed \$100,000 at 10% interest.  You would pay \$10,000 per year in interest.

\$100,000 could enable you to invest \$10,000 in ten projects.

If ten properties enabled you to earn,

\$12,100 x 10 = \$121,000,

does the \$10,000 interest really matter?