Definition
A condition in which the cost of debt exceeds the property's unlevered return, reducing cash-on-cash return.
Example
Buying at a 5.2% cap with 6.8% debt produced negative leverage until rents grew.
Related terms
Frequently asked questions
What does Negative Leverage mean in real estate?
A condition in which the cost of debt exceeds the property's unlevered return, reducing cash-on-cash return.
How is Negative Leverage used in practice?
Buying at a 5.2% cap with 6.8% debt produced negative leverage until rents grew.
This definition is provided for educational purposes. Legal and tax terminology can carry jurisdiction-specific meaning — confirm with a licensed professional before relying on it in a transaction.