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 prepared form used to specify the terms of the listing contract. Usually a listing form consists of blanks the real estate agent fills in to provide the necessary information needed to ...
lender who charges an exorbitant interest rate, which is typically illegal because it exceeds the interest rate allowed in the state. A borrower may go to a loan shark if he cannot obtain ...
House designed and zoned for one-family use. Other dwellings may be attached to a single family dwelling, but do not share the same plumbing, heating, or electrical system. Single family ...
A loan in which the entire charge is subtracted up front from the face value of a loan. The proceeds received are the face value of the loan less this deduction, which increases the ...
Business organized as a distinct legal entity with ownership evidenced by shares of stock. To form a corporation, "articles of incorporation" must be filed with the state. When approved, ...
Federal tax legislation notably establishing 10% withholding on interest and dividends. ...
Organizational governing group. Either an appointed or elected body overseeing the management of an organization and rendering advice on current issues. Members are legally responsible for ...
Intermediate - to long-term collateralized loan granted to a business by a commercial bank, insurance company, or commercial finance company such as to finance the purchase of real ...
Partially amortized and requiring a lump sum (balloon) payment at maturity. ...
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