Leveraging Everything

Before I go ranting off about leverage, let us go through a common term used in the investing world. OPM (Others People Money) is exactly what it sounds like. Those people include everyone around you, banks, and everything in between. OPM just simply states the investing is done using funds outside of your own. 

I prefer to invest using OPM versus my own cash. Biggest reason I prefer to leverage my investment properties is because I am able to expand faster and target bigger investments than what I could with my own cash. Going after bigger assets could mean less competition and potentially better returns. With leverage comes risk.

Just keep in mind you do not want to overleverage yourself by having more debt than you can handle. Too much debt and not enough income to pay off the debt can lead to a financial nightmare.

How do I determine how much leverage I take on you ask. Before I begin purchasing investments, I build at a minimum a years worth of reserves. What are reserves? Reserves are like an emergency fund on steroids. Basically, the funds are meant to sustain not just you but also your investments. With that being said I have a set of criteria properties must meet before I purchase them. More on that criteria on another blog. 

In conclusion, I personally benefit more from leveraging OPM than I would buying properties using only my own cash. Again everyones situation is different and leveraging may not work for you the same way it works for me. For how to straighten out your finances check out some of the many financial podcasts out there. This will help you get financially prepared for investing in any asset class you like. 

To taking opportunities,