We think that real estate is the most significant investment you can make, but we don't want to be biased and convince you, we want to SHOW you. Let's say you have 100K that you would like to invest but are unsure what avenue will give you the greatest return with the lowest risk. Below we dive into three different possible scenarios you could choose from so that you can weigh out the risk and return probability for each one and make the right decision for you.
Scenario # 1: Business investment
If you go to the bank with 100k looking to invest in a business the best case scenario is the bank will give you 60% of the value of the company based on leasehold improvements and equipment. If you have $100,000, they may give you $150,000 more which will result in $250,000. But let me ask you this, is investing in a business high or low risk? High! And you have no idea the return you will make on the $250,000.
Scenario # 2: Stock Market
Let's say you decide you want to take your 100K and invest it in the stock market. If you go to the bank they will give you a WHOPPING ZERO dollars, which means you would only have $100,000 to invest. If you’re looking for a 6-8% return it is a high-risk investment with high chances of losses. Currently, many people have lost up to 30% in the stock market, leaving them with only 70K.
Scenario # 3: Real Estate
Now let's look at real estate investment. If you take your 100K to the bank they will on average give you 80%. So you will receive an additional 400K on your 100K investment making your total value $500,000. If you purchase a 500K property that is strictly for an investment and you are collecting rent which is giving you a positive cash flow of approximately $500 a month. If you reinvest this profit you will pay off the home in approximately 15 years. Now for argument's sake let's say in year 15 the market drops by 20% (typically real estate increases over time but we want to still run the risk factor). Now the home is only worth $400,000 minus your $100,000 investment. How much money did you make? $300,000! What does that work out to yearly? Well, $300,000 divided over 15 years is $20,000 per year which is a 20% return! Now, this is a worst-case scenario, what if the market increased by another 20% how much more would your profit increase? This is the power of LEVERAGE, and this is why we invest in real estate.
Real estate investment can feel overwhelming but it doesn't need to be. With the right team, strategy, and knowledge you can truly create the life of your dreams. Here at HME Group, we Educate you on the challenges, solutions, and opportunities in today's market so that you can make the best use of your money. Call our team today to get a customized strategy for your investment: (647) 477-0880