Last week we discussed briefly what it means to evaluate what you own vs. what you owe. A listener wrote us about the idea of leveraging, and how it works. Leveraging is a useful strategy when practiced appropriately, so we decided to discuss it here on the show.
On this episode, Natali and I are discussing how to assess your assets and liabilities, and how to be leveraged appropriately. We’ll elaborate on the importance of calculating your net worth, and how to structure your assets vs. liabilities. Join us for episode 106 of Investing in Real Estate!
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Leverage means taking what you own, and using it as collateral to make further purchases. In real estate, leveraging is how successful investors are able to quickly and effectively grow massive portfolios.
In order to leverage well, it’s imperative that you know where you stand. The first thing you should do is assess all of your liabilities. This includes all of your debts. Include the remaining balance on your mortgage and car loans, any credit card debt, a HELOC, etc.
Then determine what your assets are, and how much they are worth. Include your real estate investments, cash accounts, stocks, and 401k. Other assets could be college savings accounts, vehicles you own, and art. Include anything that is cash, or could be sold for cash.
The next step is to subtract your total assets from your total liabilities to calculate your total net worth. We follow the advice of Natali’s dad, who recommends that you should own up to 30% of your portfolio, and be no more leveraged than 60-70%.
On this episode, we’ll elaborate further on this formula, and how you can apply it to your scenario. We’ll talk extensively on the importance of leveraging, and how to use your assets to your advantage. It’s all here on Investing in Real Estate!
Are you ready to create passive income through rental real estate? Book a FREE call with our team today. We’re ready to talk about your goals and want to help you learn more about earning legacy wealth for you and your family.
On this episode you’ll learn:
- How do you calculate your debt to equity ratio?
- What lessons can we learn about leveraging from the 2008 housing crisis?
- What intangibles can serve as leverage?
- How does this concept differ from the Dave Ramsey approach?
- And much more!
EP102: Creating Streams of Cash
EP103: Behind the Scenes of Our Next Real Estate Purchase
The Instant Millionaire by Mark Fisher
Missed Fortune 101 by Douglas Andrew
How to Calculate Your Net Worth by Natali Morris
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Natali Morris on Goodreads
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