When investing, leverage can be a powerful tool.

Example: Buy a $400,000 house, but you only need $80,000 (20% down payment) or $14,000 (3.5% FHA loan) if you’re going to live there.

Now, you control an asset worth $400,000 instead of $80,000 or $14,000.

When that asset appreciates 5% in year one, that’s 5% of $400,000 (which is $20,000) vs. 5% of $14,000 (which is only $700). That’s over 28x the results.

Now, you might argue that you’ve taken on debt which is bad. You HAVE taken on debt, but if it’s at today’s current interest rates (around 3-4%), this is actually amazing debt. The posted CPI numbers at the time of this writing are over 6%, so you’re actually borrowing the money at less than inflation.

This means you’re getting PAID to borrow the money.

Leverage and debt can be amazing wealth creators if you understand some basic principles.