Fernando got up one day to go to work, as he usually did, and during breakfast he wondered where he could invest his only € 60,000 that he had managed to generate in several years of work and with great effort.

During his lunch the investment idea was still in his mind and he shared it with some friends. One of them commented on the possibility of allocating his money when buying a property. Fernando’s immediate response was that he had € 60,000 which was very far from the price of a small well-located apartment that he had seen on a real estate portal, for which they asked for € 100,000.

It was there when his friend told him about his experience investing a sum of 60,000 Euros, allowing him to increase his savings by more than 50%, thanks to a mortgage he had managed to obtain from a bank, and later renting the property.

Fernando surprised and at the same time distrusting the story of his great friend asked him for details about his investment, who in a practical way drew the following box:

Bank Loan 50.000
Purchase adnd Mortgage expenses 9.700
Monthly installment of the 15-year loan 330
Own funds of Fernando’s friend 60.000
Gross monthly rent 430
Loads 70
Taxes 30

His friend showed him how by requesting a 15-year loan from the bank for an amount of € 50,000 (whose approximate expenses were 9,700), to which he added his savings of € 60,000, he was able to buy the apartment for € 100,000.

He then commented that in order to meet the monthly mortgage payment, which was € 330, he decided to rent the apartment at € 430 per month, which was enough to pay the fee and face the charges and taxes on the home which were € 70 and € 30 respectively.

In this way Fernando was able to confirm the recommendation of his friend who, by means of a mortgage, investing his 60,000 euros in a property, and after 15 years he was able to transform that money into 100,000 euros, increasing his savings by more than 50%

Finally, it is our obligation to comment that this example is a simplification of reality, although the conclusion obtained will be the same if all the intervening variables are taken into account.

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