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%.
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