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Negative Leverage: What You Should Know

 
It’s common in the commercial real estate industry to use leverage, which means acquiring a property with debt rather than paying all cash.

Positive leverage occurs when debt increases an investor’s rate of return. Negative leverage occurs when debt decreases an investor’s rate of return.

At a high level, these leverage concepts are easy to understand. But there is a lot of nuance below the surface. In this article, we’ll take a deep dive into the concept of negative leverage, and clear up any confusion.


Read the full article on Property Metrics.

(Article by Robert Schmidt)