Following on from my last post about leveraging your savings or equity, I am going to demonstrate the Snowball Effect, where the growth of an investment property is allowed to compound year after year.
Compound Growth simply occurs when the growth of your asset from one year is added to the previous balance and the combined larger asset value is exposed to further growth the following year, and so on.
One of the most attractive elements of property investing is the ability to Leverage a smaller amount of your own money to control a much bigger asset. Banks will allow you to fund the deposit on a property purchase and lend you the balance in return for paying them regular interest.
If you already own a home, one of the best ways of funding your first or next investment property purchase is to use the equity that you have built up over the years. Equity is created either by the growing value of the property or by reducing the debt or both.
Equity = Property Value less Outstanding Debt