Leverage

posted Oct 2, 2015, 2:10 PM by Jenif OK   [ updated Oct 2, 2015, 2:12 PM ]
We have had many friends lose everything investing in real estate. In every situation they were over-leveraged and the market dropped. The real estate market will always fluctuate, there will be highs and lows. We are very conservative and follow some basic principles as investors.

First, if we get a mortgage on a property, we do our homework and make the sure rent will easily cover the mortgage, taxes, insurance with money left for repairs. Even if we are buying a home to fix and flip and the market drops while we are fixing up the property, we make sure we can rent it and cover our costs.

Second, over the years we have focused paying down our home. This has given an edge when we sell our home because we then have the ability to be able to purchase the next home for cash. Also, in a hot market, the cash offer will usually win the bidding war.

I also caution people to be careful with real estate investments as you get older. Be sure to not get caught in a situation where the market drops and you need your money. You might need to flexibility for the market to come back and that can take years.
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