Financing
Negative Leverage
When your borrowing rate exceeds the property's cap rate, so every borrowed dollar costs more than the property earns.
Why Negative Leverage matters
This is 2026's dominant trap: a 6% cap rate financed at 7% loses 1% on every borrowed dollar, which is why adding leverage can push cash-on-cash BELOW cap rate. Deals can still pencil on appreciation, tax savings, and principal paydown — but you should know that's what you're signing up for.
Related terms
Cap Rate
Net Operating Income ÷ property value. The unleveraged return a property generates, independent of f…
Interest Rate
Annual mortgage rate. Pricing varies by occupancy, program, borrower, property, leverage, points, le…
Cash-on-Cash Return
Annual cash flow ÷ total cash invested (down payment + closing + rehab). Tells you how hard your mon…
LTV (Loan-to-Value)
Loan amount divided by the lender's eligible value basis. Investment-property cash-out limits vary b…
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