OPM refers to Other People’s Money. This is one of the biggest factors and best kept secrets when it comes to contributing to the riches of some of the wealthiest folks around. A lot of affluent people actually built their vast empires using OPM.
The lending business is quite lucrative. There are many lenders who have made fortunes using OPM, which is lent to home buyers at rates that are five to six percent of what they gave for the use of their money. Debt servicing involves paying money as interest on the money borrowed. It is true that while lenders allowed loans in the past without having annual income on applications being checked have stopped giving such loans. In many cases even if they offer these loans on paper, they decline them in 99% of the actual cases. Investors who used to make money by real estate investing and other self employed options find this quite irksome as well as bad news for their business.
When it comes to fund management, investment banking and securities dealings, people get commissions and charge fees to bet with OPM. They mix all kinds of money, with the money of those who have higher risk appetites being mixed with those who have lower risk appetites.
Those who use OPM to buy real estate should invest keeping in mind the business perspective only and not let the crowd or the herd mentality influence their investment decisions, especially when dealing with large sums of money. It is here that one should learn well from past experience.
There are some investment clubs and groups that are formed as general partnerships and could be constituted as limited liability companies or even partnerships. These are a good way to get to start investing in property. Investment clubs could become corporate entities, but the double taxation that becomes applicable gets in the way and reduces desirability as compared to partnerships.
If you gain name and fame as being responsible with OPM, people would be willing to invest with you, but only if they know what you can do and what they can expect from you. They have to be able to see your vision for what you can do with their money and the kind of profits that you can make.
You also have REITs or Real Estate Investment Trusts that invest in real estate or investment property. They are interested in real growth as they invest in real estate for profit. The debt burden drops in favor of real growth.
Stock markets are volatile and if these tank, stocks become mere paper. But in the case of real estate, the property has some intrinsic value that can be used. In investment growth, income or growth can be expected. Growth or capital gains would need and call for a longer time horizon, where rental income is an example of income return through regularly generated cash flows.