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  • Writer's pictureSebastian Torres

Negative Leverage

There has been a lot of talk in our industry about “negative leverage” but what does that mean?


At a high level, negative leverage occurs when the cost of debt negatively affects an investor’s rate of return.


This happens in market environments where the cap rate (net operating income divided by the value of the property) is less than the mortgage constant (annual debt service divided by the principal balance of the loan).


Our current situation, where cap rates on actively listed properties have remained relatively low while interest rates for leveraged buyers shot up in a short period of time, is the perfect catalyst for negative leverage.


If you are interested in more detailed information check out this article and reach out to your trusted mortgage banker.


Read the article here.


Contributed by Sebastian Torres, Vice President


 

As your exclusive advisors, CommCap utilizes proprietary systems, market expertise, and years of experience to secure aggressive financing options that best fit your property. Exclusive correspondent and servicing relationships with Life Insurance Company, CMBS, and Agency lenders ensure a broad and in-depth representation of current market conditions. Our team of advisors craft a loan structured to enhance revenue and allow you to focus on increasing cash flow.


We do not list, sell, manage, or lease property. We only arrange financing and are the best at what we do.

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