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
The down payment on the price of a real estate. For example, it is customary to make a down payment of 10% of the value of a real estate parcel upon signing the purchase agreement. ...
Selling price for a property less assumed mortgages by the buyer. For tax purposes, the computation of the contract price is critical. ...
Bond whose interest is free of federal, state, or local tax in the state of the issuer. It is typically a municipal bond of estate or county agency. For example, a New York City resident ...
The right to demand that title be conveyed upon payment of the purchase price. ...
Charge levied against property owners to finance an improvement made by the local government which benefits the homeowners and commercial businesses. Examples are sidewalks and sewers. ...
Factor employed by real estate agents or appraisers to determine the change needed in operating income to obtain a desired rate of return. It is used to evaluate income-producing property. ...
Basis for the valuation of property acquired from a decedent for tax purposes. The unified transfer tax in 1976 provides for the valuation of property to be the adjusted basis immediately ...
Also called a will. Describes the disposition of property. ...
Stature regulating the use of credit information. Allows consumers such as prospective homeowners access to their credit files. It requires a lender to explain how loan interest is ...
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