Is it Smart to Borrow Money to Invest?
If you’ve been following our assortment of available turnkey rentals for sale, you know that we currently have available properties in Ohio, Missouri and Michigan. We often have turnkey rental properties in Tennessee, too. Based on the real estate market today, it’s only natural that you’re probably eager to get in on these hot investment opportunities as soon as possible. But it may be that you don’t quite have enough saved up for your down payment. The big question is; should you wait until your savings grows, potentially missing out on your window of opportunity? Or is it smart to borrow money to invest right now?
What the Experts Say
Throughout history, financial experts have gone by a rule of thumb when it comes to managing debt: borrow to invest and use your own funds for perishables. For example, you don’t want to put groceries on your credit card unless you pay it off every month. No one should be paying interest on lettuce! But if you have a chance to invest in something that has the chance for a greater return than the amount of interest you pay on the “loan,” then it makes sense to invest. In a case like this, your potential for return is greater than the cost of the loan.
For the sake of an example, let’s say that you see that a local company is selling off its assets, including a commercial car window tinting system. If you were interested in a side gig, you could buy the equipment on your credit card, pay it down over time with interest, and operate your own window tinting service. Your profit margin would be the difference between your sales return rate and the cost of interest on the credit card. Eventually, the equipment would be paid off and then your profits would jump.
What We Think
We think that it makes great sense to borrow money to invest, depending upon your circumstances. After all, that’s exactly how MartelTurnkey got its start. In what feels like a lifetime ago (but it was only 2018!), Antoine borrowed $40,000 from Eric Martel’s retirement account. We leveraged that money to purchase what would be our first turnkey rental property. We spent the remainder of the $40,000 on renovations, and subsequently sold it to our very first investor. From there, the rest of the story is that we now have a $50 million dollar family business that:
– Provides elegant and lucrative investment opportunities for our investors
– Helps renovate and uplift entire neighborhoods in our markets
– Supports each member of our family with jobs
– Supports several full-time staff with jobs
– Supports a variety of contractors and freelancers with jobs
Pretty good, right? And it all came about because we borrowed money to invest. Now, one big factor in our success is that we invested in ourselves. We knew our own level of commitment to the project. We knew that our family is hardworking; that we were willing to “go the distance” and persevere through challenges in order to succeed. Those things informed our decision.
When you decide whether or not to borrow to invest, you need to choose what will inform your decision. We suggest that you at least consider the following when making your decision about whether to borrow to invest in turnkey rentals:
Can you trust the turnkey rental company? We believe that we’ve proven our trustworthiness over and over again. Just have a look at our many client testimonials for proof!
Is money cheap to borrow? Right now, interest rates on borrowed money are at an all-time low. Cliche or not, there’s never been a better time to borrow.
Does the turnkey rental property offer a good ROI? All of our turnkey rental properties provide positive cash flow for our investors. You can download financials on any property and see for yourself what your ROI will be.
Am I ready to be a passive investor? Luckily, there isn’t much you have to do to be a passive investor. Investing in a turnkey rental isn’t another job (like that window tinting project!). You just invest, sit back and let your team do the rest.
Property prices are high right now, but as you read in last week’s blog post, rental prices are high, too. Simply put, the sooner you invest, the more money you stand to make. When you’re ready to invest, please reach out to us. Our goal is to make you richer.
“We hit some rough water with the bank but MartelTurnkey is tops in my book. Communication, which is the biggest key in long distance real estate transactions, was as good as it gets, got my questions answered promptly and they helped me work with the bank.”
~ Ron, Northridge, CA