22
Please explain leverage to me
(lemmy.ml)
Learn about budgeting, saving, getting out of debt, credit, investing, and retirement planning. Join our community, read the PF Wiki, and get on top of your finances!
Note: This community is not region centric, so if you are posting anything specific to a certain region, kindly specify that in the title (something like [USA], [EU], [AUS] etc.)
You're mostly on point. You get a loan to buy a property, and then sell it later. This is already using leverage, since you're taking in the full appreciation of the property, while only using a fraction of your own money.
But this is peanuts, what you want is more leverage. But you're not going to get it from personal mortgages and houses with easily determined value.
So you take you money and you buy, say, a run down theme park on the cheap. You draft some amazing development plans, and then you have the whole thing evaluated by your buddy, who is of course a famous theme park expert (or claims to be anyway). Turns out your park is worth potentially hundreds of millions! Now, since you own potentially hundreds of millions, it's easy to get more loans.