A common strategy in commercial real estate investing is to multiply your spendable cash return by utilizing favorable debt. It is referred to as “positive leverage.”
Positive Leverage in Action
In the example below, buying the same $1,000,000 asset yields nearly double the cash flow (18% versus 10%) by utilizing favorable financing. Since the investor’s cost of the loan is 8%, and they are receiving a higher 10% return, their cash position is magnified to an 18% return. Click to learn more about the benefits of commercial real estate investing.
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