And then instead of risking the value of the investment, you risk 5x it? That's a completely different risk profile from the listerine royalties. What's the listerine yield if you lever it 5:1?
No, your risk is the mortgage, but it's paid by the lesee. Most people I know do it by putting down 10%, getting a 30-year mortgage for the rest, then rent it out. Eventually the property pays for itself.
Let's take an example: a 100k fixer upper. You put down 10k, finance the rest. You spend 25k on remodeling it, so you can rent it out. The house brings in say 850 a month, making cca. 10k a year. So you make 10k a year on a 35k investment, which is a 28% ROI. Obviously before taxes, and any mainteneance etc. But this is how most retail real estate investment work.
10k/year on a property with a market value of 125K is a far higher cap rate than I see to begin with, but I live in a nicer area where a room in a house is the only thing you can get for less than $1000. I know there are much higher yields in Section 8 and slumlording, but that's more of a business than an investment because of the extra work involved, and one where I hear success requires a moral compass that I don't align with.
