Leverage: Increasing Your Real Estate Net Worth
Consider the common real estate purchase requirement of a 20% down payment – or $60,000 on a $300,000 home, giving you $60,000 in equity. The buyer is essentially using a relatively small percentage of his or her own money to make the purchase, and the majority of the money is being provided by the lender. Real estate investors often refer to the remainder of the purchase price as "other people's money," since persons other than the borrower provided the money needed to make the purchase.
In 2015 many areas of South Suburban Denver properties appreciated 20% in one year. That same home would now sell for $360,000, now giving the borrower equity of $120,000. That $60,000 investment doubled in 12 months.