LEVERAGED ASSET INVESTING is a technique that seeks higher investment profits by using borrowed money. These profits come from the difference between the original amount invested and the portion earned from the performance on the higher balance that was barrowed; also referred to as OPM (other people’s money). When wisely calculated from the beginning, this method becomes the sweetheart of investor aspirations. This is how empires have been built and forms the foundation of what we refer to as “big business principles”. For our purposes here, an investment in income producing real estate is proposed though a more complex case can be made for the same by the development of a business.
LEVERAGED ASSET INVESTING
Displayed here is a simple illustration that employs this method demonstrating an investment in real estate. The most important calculation for determining future assumptions, in this scenario, is the investment’s ‘internal rate of return”. IRR is calculated by converting the total net profit realized from an investment to a numerical yield on the down payment which gained from what was borrowed and after all costs.