Why buyers have historically made money in property
“Hello and welcome back to daily buying tips, I’m Dean Berman from Berman Buys.
Today were going to talk about why buyers have historically made money in property.
It’s funny because the reason has nothing to do with property.
It’s all about the finance and what happens because of the finance.
Banks and financial institutions lend money to buyers or borrowers.
Usually 80% of the property’s value is lent.
Whilst the other 20% is from your own savings.
So on a $1m property $800,000 comes from the financial institutions and $200,000 from your savings.
Think about that for a second.
Imagine if you had to fund the entire 100% purchase.
That would make it much much harder to buy.
Lending enables purchases to buy property they don’t have the full amount for now.
In turn you pay interest.
What is happening when prices rise is your getting the 100% benefit on the 20% you physically invest.
A compounding affect takes place over time.
Which is where the equity and wealth is made.
There must be a reason why Einstein said “compound interest is greatest mathematical discovery of all time”.