Property expert Mr.Brandon Turner told On Forbes: “Using mortgage loans as effectively as buying a super asset does not really pay for it… Therefore, they are super-profits. “
This is a great idea for those who do not have money but passionate about getting rich from investment interim real estate. However, the reality is beautiful as Turner has said, in this article let’s learn a bit about the potential and the challenge of using financial leverage to make real estate business profitable.
Use financial leverage to make real estate business profitable
In fact, many investors have used the financial leverage method to property business is very successful. Having an investor who has a strategic vision and rational calculations will bring them great profits.
For example, Mr. A invests in apartment apartments to be completed with preferential prices down 30% about VND1.8 billion and 20% advance payment (VND360 million). With the policy of expansion and preference of finance and banking groups, Mr. A is able to borrow money easily. The remaining amount will be paid slowly after the apartment is handed over. In the perfect apartment, Mr. A resold the apartment for VND2.5 billion (complete house price). After selling his house, Mr. A collected VND 700 million minus VND 400 million loan and Other types of expenses Mr. A easily pocket VND200 million – VND250 million.
The example we just released is just one of the cases of using economic leverage to make property business profitable. In fact, this activity took place quite exciting, especially in the property stage is still fluctuating as today.
Potential and limitations when using financial leverage in property business
High profitability: Using financial leverage in buying and selling real estate is now a profitable industry. Many young people from the white hands’ thanks to acumen along with the application of financial leverage in a flexible way to quickly become property giants in a short time.
Capital Optimization: The law of leverage in the sale of the property has battered all stereotypes about the stability of capital when investing in old property. The use of financial leverage to make money without the need to invest in the pinnacle of modern home business.
The flexibility of capital: Flexible use of financial leverage in real estate business helps investors to optimize capital mobility and facilitate more investment. During the time of capital rotation, profit is generated from many sources.
Using financial leverage to real estate business, although bring great profit, they still have many risks.
Lack of orientation: The most important factor in using financial leverage is the quick hit. In cases where the investor misjudges the investment in real estate, the sale of the property is difficult, causing a halt in capital and interest rates. For investors without fixed capital, this will be the end of their property business.
You can read more information at Vietnam Real Estate News
Selecting Unsurpassed Capital: For landlords based on financial leverage, selecting a financing source is critical to the 50% success of the deal. This is because real estate lending rates offered by banks are very high, ranging from 7 to 11%, much higher than conventional loans. On the other hand, each bank has preferential lending policies such as (FDI, ODA …), the lack of knowledge and not take advantage of these loans also cause your profits are reduced or increased the risk.
The property market is fluctuating: the property market is weak and many fluctuations cause the price of housing in Vietnam is fluctuating. These fluctuations have a certain impact on financial leverage when borrowing land. In the case of falling housing prices or freezes, the leverage method is completely counterproductive.
It can be said that using leverage in real estate business for profit is a new and daring form. This method, there are intertwined effects on the property market in our country. On the one hand, there are many new property giants, on the other hand, making the business situation, buying and selling of land and house become unstable and difficult to control. Investors should carefully consider before deciding to use this method to invest and get rich.
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