Borrow Money to Make Money
Who doesn’t want money? It’s something that every human being on earth wants to have from a five years old child to dying 90 years old. It is something which can buy you anything you want, be it your food, house, car, yacht, business empire etc. But very few of them have their pockets full. If people don’t have money to buy their needs they borrow it from bank, employees and other lenders, but most people spend their whole life paying dues. Rest of the people borrow money but rather paying their credits and earn profit through it. These people are able to make use of their borrowed money to make money by investing in profit yielding businesses. If you are among those people who want to borrow money to make money then today there are lots of opportunities. There are two kinds of debts; good debt and bad debt. You can use good debt to invest in profitable assets but bad debt is something you use to buy liabilities like car, consumables, yacht etc. You can invest from small business to large business and make profit out of it. Here we will discuss few opportunities to make money with your borrowed money. But before that we need to understand how to borrow money.
Borrowing with good and bad credit
Before approaching a lender who can borrow you money, you need to check your credit scores. Good credit score means you have very good history of paying your dues on time. And bad credit means you have been someone who has always been late in paying your due.
It is very easy to check whether you have bad credit or good credit. First thing you should do is get your annual credit report. You can easily get your credit report over internet with websites like annualcreditreport.com and many others. This report will give complete gist of your expenditure and kinds of credits you are holding. Look out for the most problematic credits which are most likely your fancy buys like yacht and their late payments etc.
Second and must thing to do is get your credit scores. Credit score is nothing but a score card which reflects your creditworthiness. This score is based on individual’s credit report. There are a number of bureaus which provide credit scores based on annual credit report like Experian, Equifax, TransUnion, Innovis, CIBIL etc. depending on the country you live in. The higher your credit scores, the more banks will be keen to give you good loan. The lower the credit score the less interested the banks will be to loan you money but all lenders are not the same, for some it may be bad to loan you money but there is always one lender who might be interested in loaning you money.
Now you know why it is important to have good credit score. It is something which will decide whether you are qualified for a loan or not. Now with good credit scores you can approach a lender. Lenders can be a bank, an employee, private financing firm etc. You can apply for loan with a purpose of loan accompanying it. So that they will be able to provide right amount based on the purpose and need. There are money loans like business loans, housing loan, auto loan etc. It’s your purpose which will decide what kind of loan you qualify for.
Finding a lender is easier than you think because there are many lenders who offer finance whether you have a bad or good credit. Getting a good lender is more important to save yourself from being robbed by high rates with long payment terms accompanied with hidden charges. Simple research over internet will help you to find a good and respected lender. Even you will come across various websites which provide information on lenders in specialized kind of loans like business loans, housing loan, auto loan etc.
Once lender approves your loan, you will come across loan terms and rate. You have to be very careful with loan terms and rate. You should not be content with what you would be paying every month, rather focus on how much you are paying with what rate and for how long you will be paying. Rate is a reflection of your credit score, the better the credit score, the more reasonable the rate and the poorer the credit score, the higher the rate of interest on loan. Individual with poor credit is bound to get higher rate compared to the individual with better credit, so you must be prepared for it. Other thing you must note is payment term which means, for how long you would be paying. You will end up paying higher amount if you go for long terms.
Money making opportunities
There are lots of opportunities to earn money by investing. All you have to do is to buy or invest in something which goes up in terms of value. Buy some assets with increasing price value with team like real estate, or some products which you can sell. Here are few businesses where you can use your borrowed money.
Over the years it has grown to be major area of investment with very high profit margins. Even the average man dreams of investing in real estate because it is easy to understand as opposed to investing in bonds or mutual funds which are complicated.
Buy and hold is the simplest strategy in which you can buy your own property for the purpose of renting it out to a tenant and collecting monthly fixed rent from him. This strategy has potential to provide you with positive cash flow every month. This also has potential to put away the equity every month with your mortgage payments in turn providing a profit. The exit strategy is very simple for if your current tenant leaves then you can always find new renter, lease the property or even sell the property.
Other strategy is Hold and Flip. It is something in which you buy a property below market price and then renovate it to sell as soon as possible on market prices. This strategy does require good amount of investment even after buying it. This also demands you sell or rent it out as soon as you have renovated it because you do not want your money to be stuck for long period of time. The longer you keep this property, the more money you will be losing. This strategy requires of you a good understanding of real estate market in terms of money and determining demographically which area is good for such investment. Even good timing is required for the buy and flip. As you are investing and quickly selling or renting it out, this gives quick capital gain. You should sell this property within 3 months of investing as this gives good profit within very small period of time. The exit strategy is mostly you might end up with selling the property. Such strategy is risky because if you fail to sell your property then you might end up selling it with lower value.
One more option which is very useful is lease to own. In lease to own, you buy a property and instantly lease this property to a renter for predetermined time and predetermined rent with an agreement. This lease allows you make someone else owner for fix amount to time on agreement for fix payment. Here you can get is instant cash flow as tenant is supposed to pay a down payment up front before leasing the property. And you also get lease cheques regularly. Here you will get a buyer who is pre-qualified and saves commission for real estate agents. Most importantly very low maintenance as the buyer has taken the property on lease it is their home, all maintenance wholly belongs to the buyer. In case tenant leaves early, before the lease period ends, you get to keep to the property, down payment and credits are also yours. The exit strategy is very simple, that is, if your current tenant leaves then you can always find new renter, lease the property or even sell the property.
REIT, it stands for Real Estate Investment Trust. This is a trust formed by various investors which agree together to invest in real estate. This type of investment is done mostly in commercial areas to build large building like skyscrapers, mall etc. as it require high investments. It is a very good way of investing but the profit is shared based on your share.
Creating a business
You can also create a business which can yield money for you. You can start hospitality business like small restaurant which always have high profit margins. You can buy some small property in tourist region and make it into a hotel which is another very high profit yielding business. This does require bigger loans. But if you can get the loan it is always a good bargain. This business doesn’t require some special degree. Anyone can open their hospitality business.
You can also start a small retail business. This does require you to have good size of money but this business must have positive potential for cash flow, in no time you will be able to pay your dues and start earning profit. This business has very good potential to expand in no time. The more you invest in this type of business the more it will grow.
If you are someone that has a degree in computer science, you can start your own software company. This business only require loan for its infrastructure. Main asset of IT business are its employees. Today’s banks are very good in providing business loans to these talented IT individuals to set up their business. If your product is very good it multiplies your money in long term.
Another business you can set up with small loan is wholesaling. Wholesaling is getting a great real estate deals, writing a contract to acquire the deal, and then selling the contract to another buyer. Wholesaler never actually owns the property. He actually hunts for the great property and deals with variety of property tricks. He is like a middle man who works on commission or fee. This is one of the safest ways of investment as there is buying of property and maintenance. But it definitely depends on the market situation of real estate.
Today there are large numbers of people looking to buy or sell the real estate assets so, such middle men are very much in demand. This requires very low setup cost after this, it very much depends on your networking skills.
Stock and bonds
Stock is nothing but a value of share in a company. These are something in which you will buy stock of a company and wait till its prize increases. This is a risky investment because stocks are something which is not easy to predict. Market of these assets can come down low one day or shoot up to sky high doubling your money. But if you are someone with firm nerve and niche for stocks market. This could help you make money in no time. This type of business requires no infrastructure investment, but you just have to buy them when the prices are low and wait for them to rise.
A bond means an agreement with a company in which you are paid interest on the money you have lent to a company. These are also similar to stocks if companies are doing well then you will have very good cash flow. It is just like an investment in the company. As the company grows, you have a good chance getting your money multiplied. It is important you choose a company which is growing very fast.
“Borrow money to make money” has a beautiful aspect about it that is, your debt is always paid by someone else. In case of real estate business, it is your tenant or buyer who will pay your debt. In case of small business, your customers are paying down your debt. In case of investment, your clients are paying down your debt. In case you are producing a product through small business again you will get your debt paid by your customers. It is important you use money smartly and for your profit.