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
Term given to two depreciation systems defined by the Internal Revenue Service: The main system is called the General Depreciation System (GDS). Under GDS, most property is assigned to ...
One-story house with a low pitched roof often having an open floor plan. ...
Geographic area that is attractive to prospective tenants. Square footage in an office building or apartment house that may be rented by a tenant. ...
Partnership agreement where the parties consent to purchase the interest of those leaving the partnership while those leaving similarly consent to sell their interests to agreement for a ...
Situation in which an owner of property sells the property to an investor and then leases the property back, usually for a 20- or 30- year term. ...
Land located next to water that has and will continue to experience water damage. The land generally is not suitable to build a structure on. In some cases, federal or local government may ...
Situation in which very few prospective buyers of real estate are rejected by lenders. This may be due to ample money supply, lower interest rates, and/or relaxed credit standards. See also ...
A court order on an issue directly related to the immediate action. ...
Wall having an air space between the two sides. A hollow wall is often covered with wallboard that is nailed to the wall studs providing an air space between the two sides. ...
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