Investing 101, Using Leverage in Real Estate.
Because the market is on the rebound as I write this, I wanted to say a few words about “leverage” in real estate. In a nutshell, leverage is using other people's money to buy property, and why using leverage in real estate can generate significant returns, with only a modicum of risk.
Maybe you recall what a lever is from grammar school math class. It's been a long time since I sat in Miss Alberta’s class in Ridgewood, NJ, but still, when I think of a lever I visualize a worker moving a huge rock using a long pole and wedging that pole against a fulcrum so he can make the big rock move. If you remember that scenario, the key is the length of the pole. I think it was Archimedes who said, “with a long enough pole, I could move the earth.” In real estate, the key is a low mortgage rate.