Leverage Is A Tool For Growing Your Portfolio.
Despite rising interest rates, seasoned real estate investors often thrive by focusing on leverage rather than just low interest rates. Leverage, or using borrowed funds to boost investment returns, is essential for quickly scaling profits in rental or fix-and-flip properties without using large amounts of personal capital upfront.
Although homebuyers typically use mortgages, traditional loans for investors require significant equity, potentially limiting further investments. However, lenders like Kiavi offer high-leverage products, requiring as little as a 5% down payment, enabling investors to free up capital and increase profits faster.
Making The Most Of Your Equity
Consider a $100,000 investment property. Paying cash requires $100,000 upfront, while a typical short-term loan might need a 20-30% down payment ($20,000-$30,000). Kiavi’s loans, with a 95% loan-to-cost ratio or 80% after-repair value, can reduce the down payment to just $5,000-$20,000. These loans often require interest-only payments for a period, preserving cash and maximizing profits, especially if refinancing or other payoff methods are planned within three to 10 years.
Benefits Of High Leverage Loans In High Interest Environments
1.More Cash In Hand. High leverage means more retained cash, allowing for portfolio scaling or other investments.
2.Speed To Market. High-leverage loans free up funds, enabling rapid movement to new opportunities.
3. Profit And Flexibility. Despite higher finance costs, the return on equity invested is greater with leverage, and refinancing remains an option as the market evolves.
High-interest rates might deter some, but waiting for rates to drop could mean missing out on opportunities. Although high-leverage loans come with higher costs, they are still a viable strategy for investors looking to grow their portfolios.
Getting Started
Investors should ask the right questions to maximize returns on investment properties. Loan types vary in terms, rates, penalties, and schedules. Kiaviís platform allows investors to input property details to explore various loan options, including adjustable or fixed-rate mortgages.
Leverage is a strategic way to scale a real estate portfolio and achieve high returns with minimal upfront investment, even in high-interest environments. As long as investors manage debt responsibly and make timely payments, leverage remains an effective tool for portfolio growth.
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