What happens when you try to borrow money to buy stocks or bonds

What happens when you try to borrow money to buy stocks or bonds

There are few investments in this world that allow you to borrow money in order to acquire the investment. Can you imagine going to your local bank and asking for a low-interest $100,000 tax favorable loan to buy Amazon stock?

Once they were done laughing, you’d pick up your well laid out presentation along with your pride and amble out the door to head to the nearest pub in a vain attempt to forget your humiliation.

Yet, you can do this in real estate over and over again. It’s the concept of using other people’s money in order to make money for yourself. This works for your primary home, a secondary home, vacation property, rentals, commercial property and even vacant land, it just a matter of how you set up your portfolio based upon your goals.

Eric Belsky, the Managing Director of the Joint Center of Housing Studies at Harvard University expanded on the top 5 financial benefits of homeownership in his 2013 paper –The Dream Lives On: the Future of Homeownership in America. Citing this reason back when real estate was depreciating in some markets and with only moderate gains in other markets.

While I’m always hesitant to recommend anyone buy real estate based on speculation of future values, it cannot be denied that there are two tried and true factors that make real estate a fantastic investment:

  1. Time – the longer you hold any investment and especially real estate the safer your investments will become against volatility in the marketplace.
  2. Leverage – with the ability to only put a small percentage down (sometimes even lower than 5% cash down) while at the same time recognizing the gain on the total value of the asset, you will recognize leveraged returns with these amplified with an appreciating market like the one we are in today.

Check out my video for more information on this topic.

Want more?

Our friends at Keeping Current Matters offers 5 financial reasons to buy a home. Click here to see the entire list.