Leverage is a quantitative, straightforward indicator that you can use anytime as a standard risk formula. You can leverage investment products or borrowed money to increase the fund's market share beyond its current value. We all know, leverage permits it to raise its possible profits as well as losses. Let me explain what is leverage.
What is leverage in real estate?
In real estate, leverage refers to the utilisation of borrowed money to fund your investment. You can increase your purchasing power by using this strategy. You can invest in huge revenue assets and boost your return on investment by applying leverage. As a result, the lower the investment, the greater the leverage and, as a result, the higher the return on investment.
What does leverage mean?
You have Rs. 50 lakhs to invest in real estate, and you have two property alternatives. The first option is a compact residential property that costs approximately Rs. 40 lakhs, while the second option is a structure that costs around Rs. 75 lakhs. The first alternative may appear ideal in this case because it is within your budget. However, if you evaluate the investment in the long run, investing in the second choice through leverage will be a smarter move.
Benefits of leverage in real estate:
1) Higher returns on investment
Perhaps the most essential advantage of using leverage to invest is that you can earn a higher return on your money. When you use an investment loan or a mortgage to fund a rental property, you're opening yourself up to a steady income in the form of rent, improving your return on investment. You can also use the rent to pay off the loan EMIs and build equity in the property.
2) Buy costlier properties
As previously said, the main goal of leveraged investing is to enable you to purchase a property that would otherwise be out of your reach. For instance, there is a property that could cost Rs. 1 crore and you don’t have that much money to buy it. So you can buy it using the leverage option.
3) Tax benefits
You may be eligible for tax benefits under sections 24 and 80 of the Indian Income Tax Act if you invest in real estate with a loan or borrowed funds. A discount for Interest Charged on Home Loan, a discount for interest paid on a house loan during the pre-construction stage, a discount on principal repayment, and a discount for stamp duty and registration charges are some of the tax benefits available on homes purchased with a home loan.
Now you know what is leverage.
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What is leverage?
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2022-05-16T18:41:38+00:00 2022-05-16T18:41:39+00:00Comment
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