While you sleep, your house could be working for you. With the leverage effect, financially successful people build up a fortune in just a few years that others need decades to achieve. The best thing about it? You don't need your own capital.

The leverage effect is a financial principle that enables you to make a much larger investment with comparatively little of your own capital. You use "other people's money" - usually in the form of a loan - to achieve returns that exceed your financing costs.

Frank Rahlf, CEO of DARIA: "If you acquire an asset that increases in price simply by owning it, it is not even essential that it generates a monthly income."

The special thing about real estate, however, is that it not only increases in value, but also generates ongoing income. This combination makes the leverage effect in real estate particularly powerful.

• Real estate generates current income through rental income
• They offer protection against inflation
• They experience a continuous increase in value in the right locations
• They are regarded by banks as first-class security

"Don't get into debt" - you've probably heard this advice many times. It's right for consumer debt. However, when it comes to investments, especially real estate, you need to think differently:

• Consumer debt is a long-term burden on your finances
• Investment debt can increase your wealth if the return is higher than the financing costs

The two pillars of the
successful leverage effect 

To successfully utilize the leverage effect, you need two fundamental pillars: Creditworthiness and collateral.

1. creditworthiness: the invisible key

Creditworthiness is your financial reputation. In the USA, this is expressed by the credit score - a number between 300 and 850. From a score of 730 to 740, you are considered a first-class borrower and get access to the best conditions.

The difference in interest rates between a mediocre and an excellent credit score can easily be 1 to 2 percentage points - a huge difference for larger financings.

DARIA supports you in building up your US credit rating and ensures that you reliably achieve a score of at least 740.

2. securities: Why real estate is king

There is a clear hierarchy when it comes to securities, and real estate is the undisputed leader. 

Why? 

Because they are substantial, relatively stable in value and can be sold if necessary. No bank will offer you such favorable financing conditions for cryptocurrencies or an art collection as it will for a property.

Saving up versus saving down - the crucial difference

There are two basic ways to build up wealth: saving or withdrawing.

Imagine you save 500 euros a month. After one year, you have saved 6,000 euros plus interest. With an optimistic return of 10 percent, that would be around 6,300 euros. After ten years, you would have built up assets of around 86,000 euros.

This is the traditional way of saving, where you make two crucial compromises:

1. Loss of time: you forgo years of potential returns
2. Size limit: The amount of your investment is limited to what you have been able to save

In contrast to saving up, saving down relies on the leverage effect. Instead of saving 500 euros a month, you could immediately invest 300,000 euros in a property with the help of a loan. With an annual return of 9 percent, you will generate a gross return of around 27,000 euros in the first year.

Even after deducting the financing costs (at 4 percent, that would be EUR 12,000), you will still have an annual surplus of EUR 15,000 - plus the increase in the value of the property.

The security swap as a strategy

One of the most powerful applications of leverage is the "security swap". This strategy allows you to turn assets you already own into high-yielding investments - without having to sell them.

Let's assume the following situation: You own a home that is fully or partially paid off. There is considerable capital in this house - but this capital is not working for you. It is tied up and does not generate any income.

This is how the security exchange works:

1. You take out a loan on your existing home (60 to 70 percent of the value)
2. With this capital, you invest in a high-yield property, for example a DARIA villa in Cape Coral
3. The rental income from the new property exceeds the financing costs
4. You also benefit from the increase in value of the new property

This strategy is particularly elegant because you don't have to invest any of your own capital - you simply use a security that you already own. While your own home in Germany remains your home, the capital tied up in it works for you in a highly profitable market.

It's like cloning your house: The original stays in place while the copy makes money for you. Many German homeowners are literally sitting on a dormant asset that they could activate without changing the center of their lives.

The advantages of the security exchange
between markets

The security swap is particularly effective when you move between different real estate markets - for example, from a slow-growing German market to a dynamic US market like Cape Coral.

"Three fundamental mistakes hinder the wealth accumulation of many property owners," explains DARIA CEO Frank Rahlf. "Firstly, leaving the potential of existing land charges untapped. Secondly, investing in locations without significant value appreciation. And thirdly, not strategically expanding their own credit rating and security base."

With the security swap between Germany and Cape Coral, you are addressing precisely these errors. You activate tied-up capital, invest in a growth market and build up your international credit rating at the same time. The tangible benefits of this strategy are impressive:

1. Yield difference: In Germany, the rental yield is often only 2 to 4 percent, while in Cape Coral it is 8 to 10 percent.
2. Appreciation potential: While German properties increase in value by 2 to 3 percent per year, Cape Coral can expect an increase of 8 to 10 percent.

Why Cape Coral offers ideal conditions

Cape Coral combines several factors that make it the ideal location for the leverage effect:

"Cape Coral is like a diamond among the possible locations," says Frank Rahlf about the deliberate choice of location. "We specifically chose Cape Coral rather than Miami, Orlando or other regions in the USA because this location offers unique advantages."

Cape Coral is one of the fastest growing cities in the USA. As a peninsula, the city is naturally limited - rising demand with limited supply ensures increases in value.

According to data from the Multiple Listing Network (MLS), the value of the average single-family home in Cape Coral has increased 128.02 percent over the past decade.

One decisive advantage Cape Coral has over European vacation properties is that it can be rented out all year round. While the peak season on the Baltic Sea is limited to a few months, the rental season in Florida extends over the entire year.

"We don't have a real season here. We have a season that runs from January 1 to December 31," says Frank Rahlf. 

This year-round rentability means stable and predictable income for you as an investor - a key component for the successful use of the leverage effect.

Understanding the numbers: The way
to a real estate millionaire

The leverage effect can be understood not only theoretically, but also with concrete figures. Here is a more comprehensive example that shows how this strategy works over different periods of time:

Initial situation:

• You own a home in Germany with a value of 500,000 euros
• The bank lends you 300,000 euros at 4 percent interest plus 1 percent repayment
• You invest in DARIA villas in Cape Coral with 9 percent rental yield and 8 percent capital appreciation

Annual financial statements:

1. Financing costs: 15,000 euros per year (1,250 euros per month)
2. Income from the investment: EUR 27,000 per year (EUR 2,250 per month)
3. Annual cash flow surplus: 12,000 euros (1,000 euros per month)
4. Increase in value in the first year: 24,000 euros

Development over time:

After 5 years:

• Property value: approx. 440,000 euros (increase in value: 140,000 euros)
• Accumulated cash flow: 60,000 euros
• Repayment effect: approx. 15,000 euros
• Subtotal: 215,000 euros increase in assets

After 10 years:

• Property value: approx. 648,000 euros (increase in value: 348,000 euros)
• Accumulated cash flow: 120,000 euros
• Repayment effect: approx. 30,000 euros
• Total amount: 498,000 euros increase in assets

After 15 years:

• Property value: approx. 952,000 euros (increase in value: 652,000 euros)
• Accumulated cash flow: 180,000 euros
• Repayment effect: approx. 45,000 euros
• Total amount: 877,000 euros increase in assets

As you can see, by using the leverage effect, you can build up assets worth almost millions within 15 years - without investing your own capital. Particularly impressive is the exponential progression of the increase in value, which becomes more and more pronounced as time goes on.

"Anyone who uses this lever can become financially independent in five years," says Frank Rahlf. "Anyone who follows this path consistently and fully understands the concept will no longer have to worry about finances in the future."

If you also reinvest the monthly surpluses instead of consuming them, your wealth accumulation will accelerate even further.

Decisive factors for success

Four factors are decisive for the successful use of the leverage effect:

1. choose the right fixed interest rate

Choose a long fixed interest period of at least 5, preferably 10 years. This gives you planning security and protects you from interest rate increases.

2. sufficient margin between costs and income

Frank Rahlf emphasizes the importance of a sufficient safety margin: "A yield difference of at least 3 to 4 percentage points between financing costs and rental income is essential to be on the safe side. The margin should be well over half a percentage point."

A sufficient margin gives you robustness against vacancies, flexibility in the event of unexpected expenses and capacity for reinvestment.

3. location quality as a decisive factor

When choosing a location, you should pay attention to demand dynamics, economic development, infrastructure and supply restrictions - these important factors are all present in Cape Coral. That's why we build our homes in this beautiful part of the world. 

4. sustainable credit rating maintenance

A good credit rating is the key to favorable financing conditions and the basis for future leverage strategies.

Start with the strategy:
Your next steps

If you are now convinced and want to use the leverage effect for yourself, the next question is how to implement it. Here are the most important steps to successfully launch this strategy:

1. Inventory: Analyze your existing properties, their value and lending options. Talk to your bank about the conditions for a loan.
2. Build up a US credit rating: Start building your US credit rating early. DARIA supports you with an established process that has already helped numerous investors achieve an excellent credit score.
3. Location research: Find out in detail about Cape Coral and the specific locations of the DARIA villas. The location is and remains the decisive factor for long-term success.
4. Use your network: Exchange ideas with other investors who have already gone down this path. DARIA offers you access to a community of like-minded people who will share their experiences with you.
5. Plan your first investment: Choose the right investment amount for you. The earlier you start, the more time the compound interest effect has to work for you.

Using the leverage effect for yourself

Leverage is one of the most powerful tools for building wealth. With the right understanding and choosing the right location, you can build your wealth at a pace that would not be achievable with traditional savings strategies.

"These investment strategies have been tried and tested in the USA for decades," says Frank Rahlf. "No American would not let their land charges work for them. There is much more education available than here."

So the question is not whether you can afford the leverage effect, but whether you can afford to do without it. Because while others are still saving, you could already be making your house work for you and laying the foundations for your financial freedom.