The Power of Leverage
1st July 2015
Leveraging as part of a growth strategy is flourishing once more; with a stronger economy investors are willing to take more risks. Leveraging in simple terms is the process where by an investor purchasing more of an asset by using borrowed funds. An advantage of leveraging is it can help an investor build a large portfolio quickly; it improves the return on capital and the borrower can earn more from the equity.
Property investors must understand that house prices can fluctuate however the debt will remain the same. Housing trends should be monitored, especially more highly leveraged landlords who in a declining market may not be able to maintain the debt.
In conclusion, leveraging as part of a growth strategy depends entirely on the borrower. If leveraging is an option then the investor must be prepared to manage the risks.