These people tend to tell that the key is to use capital that’s not your own – like from a bank. I understand how it works with common mortgage. But let’s say I already have a mortgage, thus own one property/real estate. Now I’m in debt towards the bank and they’re not giving me another loan to buy another flat since I need to be repaying the first one (?).
So, how does it work? Where do these people get the needed money to buy the second property? The third one?
In: Economics
Here’s how my co-worker does it.
They buy a house. Over time the value of the house house goes up. So you buy a house for $250 K and a few years later it’s worth $350 K.
So you go back to the bank and take that equity out. Refinance or get a second mortgage and now you’ve got $100 K.
Use that $100K as the downpayment on a second house. Rent it out to cover your payments.
After a couple of years that house’s value has gone up, so you rinse and repeat.
They’re on their 4th building now. But they’re also in debt up to their eyeballs. They had 5 buildings, but had to sell one to help pay down the others when interest rates went up.
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