Rock Bottom Blueprint Leverage:  Another Rock Bottom Cash Flow Multiplier

Bam, I said it!  Leverage is a real estate investor’s best amigo.  So what exactly is it?  It is simply having Joe use Henry’s money so he can purchase an asset and maximize his return.  This thing called leverage is really universal and applies to all facets of real estate in both the commercial and residential sector with Rock Bottom Blueprint.

In the market today, it is really tough to find banks to lend on properties for little or nothing down.  They want an owner or investor to have some sort of skin in the game in the event that things go rye.  If you are looking at commercial properties, investors can reasonably obtain loans with 30% down.  That means that the bank is willing to front the investor 70% of the purchase price, allowing the investor to control 100% of the facility and earning all of its cash flow.  Now that is a cash flow multiplier if I have ever seen one! Are you starting to feel me?

Alright, I just realized that some of you might not understand what I mean when I use the term cash flow multiplier.  To keep it very short and simple, most commercial property is valued off of the income it generates.  When it is all said and done and all of the bills have been paid, to include the mortgage, anything left over is considered the cash flow.  We will explain further below.

Let me demonstrate the power of Rock Bottom Blueprint leverage and how the Return on Investment can surpass the rise of the property’s value.  Here is an easy-to-understand training sample a real estate mentor by the name of Dutch Mendenhall gave me to grasp this principle.

Leverage as a Cash Flow Multiplier

So for example’s sake, there is an apartment I want to buy for $2,000,000 with a $1,600,000 mortgage.  At 30% down, that means I need to put down $600,000.  Let’s assume the property increases in value by $100,000 by the end of year one. What just happened?   Increasing the value of the property from $2,000,000 to $2,100,000 was an increase of 5%.  Just divide $100,000/$2,000,000 to get the result.  However, since we only put $600,000 of the $2,000,000 dollars into the property, remember that the trusty bank paid the other $1,400,000, our return on the investment is a whopping 17%.  That is 12% more than the increase in the property!  Here you would just take the increase amount of $100,000 and divide it by the initial investment amount of $600,000 to get your result.

Can you see the power of leverage? It doesn’t make any sense to invest any other way! We just took down $2,000,000 in real estate for just $600,000, and earned a return of 17%!  Now, that type of return isn’t going to be realized until you actually sell the property, but monthly savings you get from paying a note of $600,000, as opposed to $2,000,000, will be realized on a month to month basis.  And that is the Rock Bottom Truth!

Thanks again for joining us for this short training session.  We have many more free training articles if you go to Rock Bottom Blueprint now!

Rock Bottom Blueprint Leverage:  Another Rock Bottom Cash Flow Multiplier