posted: October 19th, 2010
Robert Kiyosaki said, “In the broad definition of the world, the word leverage simply means ‘the ability to do more with less’.” In terms of investment, leverage is defined as ‘the degree to which an investor or business is utilising borrowed money’; UK banks tend to refer to it as ‘gearing’. It’s also a key reason property is probably the world’s greatest money-making machine.
Ask a bank for a loan of £50,000 to invest in the stock market and they’ll laugh you out of the building, but ask for £50,000 towards the purchase of a £100,000 property and the strong likelihood is they’ll give it to you, subject to affordability and/or rental income. Property has always been, and will almost certainly continue to be considered one of the world’s safest investment vehicles, and that’s why institutions and individual passive investors are so willing to lend against it. And that willingness of 3rd parties to lend is what helps make me and you money.