Leverage In Real Estate Investing
Definition of "Leverage in real estate investing"
Use of other people's money (OPM) in an attempt to maximize the return but at high risk. The use of leverage in real estate investing is a way to maximize yield on a small down payment. When building real estate wealth, leverage helps one grow fast without extreme risk. High-leveraged investing in real estate is particularly beneficial in a highly inflationary environment. The best scenario is when property values increase on their borrowed fund. Property values can also decrease such as that which occurred in California in the early 1990s. A risk is negative cash flow in which income from highly leveraged property may be inadequate to pay operating expenses, interest, and principal.
Popular Real Estate Terms
Same as term financial institutions: Institutions acting as intermediaries between suppliers and users of money. The financial markets are where those wanting funds are matched with those ...
(1) Financial ability and soundness of a business or individual to afford the purchase of property. (2) Worth of the dollar in real terms considering inflation. ...
Assemblage in real estate is the process of combining multiple small plots of land into one larger plot. This is accompanied by plottage, which is the increase in value that occurs when ...
Standard precut lumber sizes for lumber industry needs. The typical sizes are 2 to 5 inches thick by 5 to 12 inches wide. ...
Material used for covering the surfaces of walls or ceilings. Plaster used to be made from plaster of paris, but is now primarily made from cement mixed with sand and water. After plaster ...
Same as term junior mortgage: Mortgage placed on a property after a previous mortgage. It can be a second, third, etc. mortgage. A junior mortgage is subordinate to the terms of a previous ...
Increasing prices during a slowdown in economic activity. ...
As a legal term, abandonment defines a deliberate renunciation of rights to an asset or a business relationship. What does abandonment mean in real estate? In real estate, abandonment, ...
The floor of a building closets to the building grade. Normally, the ground floor of a building is the first floor. A ground floor can sometimes be located between the first floor and the ...
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