Leverage In Real Estate Investing

Definition of "Leverage in real estate investing"

Deborah Herman real estate agent

Written by

Deborah Hermanelite badge icon

American Way Real Estate Inc

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.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Real Estate Terms

The angle of a roof in relation to its horizontal axis expressed as a ratio of inches (cmm) per foot of horizontal distance. The sloping of ground, such as sloping ground away from the ...

Interest based on a 360-day year instead of a 365-day year. The former is referred to as simple interest and the latter is termed exact interest. The difference between the two types of ...

Privilege of a real estate investor or lender to participate in the profitability generated from property. This is in addition to any principal, interest, or dividends. ...

To fulfill , complete, implement, perform, or carry out terms of an agreement including completing a signature on a contract and delivering a document to the intended party. ...

First and foremost, the meaning of ‘punitive damages’ defines a financial penalty the defendant has to pay due to their negligent actions. The US legislative branch designed the ...

Appraisal approach where property values are estimated by comparing current comparable sales. See also market approach. ...

Unit of ownership in a real estate investment trust. ...

We know that the board of directors meaning defines a body of high executives who make significant daily decisions. But what is the definition of board of directors precisely? Typically, ...

maintenance procedures conducted to prevent later repairs and furthering a longer useful life. For example, many boilers and burners are cleaned and serviced each year before the winter ...

Popular Real Estate Questions