Before buying an investment property, you need financing.

What is leverage in real estate? Leverage is using debt to increase the potential return on investment. The most straightforward example for real estate is a mortgage, where you're using your own money to leverage the purchase. In most cases, a 20% down payment (and a good credit history) gets you 100% of the property and house you want. A 20% down payment means you're using 80% leverage, and some mortgage programs may even let you put down less.

If you're a real estate investor, you may be operating within a partnership, and the partners may be putting up all or some of the money, or the sellers may be willing to finance some of the purchase price of the property they are selling. All of these are examples of leverage in real estate


Using leverage is simply using other people’s money to make more money for you.


The Bottomline

Images of such leveraged purchases bring to mind those late-night infomercials where smooth-talking pitchmen suggest that you can earn millions of dollars buying properties with no money down. While it is possible, we don't recommend going this route.