The term “levered” or “leveraged” refers to the use of borrowed funds or debt to finance an investment in a property. Leveraging allows investors to increase their potential returns by using a smaller amount of their own capital and borrowing the remaining funds from lenders. However, leveraging also increases the risk associated with the investment, as the investor must pay back the borrowed funds regardless of the property’s performance.
The level of leverage can be expressed as a loan-to-value (LTV) ratio, which compares the amount of debt to the value of an investment property.
Click here to get this CRE Glossary in an eBook (PDF) format.