positive leverage

Definition

When borrowed money produces a higher return than the interest cost, making you look like a financial genius. It's the Holy Grail of real estate investing: using other people's money to make more money than you're paying them.

Example Usage

With a 4% mortgage rate and an 8% cap rate, the investor enjoyed positive leverage that made her banker quietly jealous.

Origin

Financial term adapted to real estate investment analysis in the mid-20th century

Fun Fact

Positive leverage can flip to negative leverage faster than a property can flood, which is why 2008 was such a party.

Source: Real estate investment and finance terminology

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mlod

mega laugh out loud of doom...