In the context of CoreProp, leveraged refers to a property
investment strategy that uses borrowed money to purchase a property. This can increase the potential return on investment, but it also increases the risk of financial loss if the property value declines.
There are two main types of leveraged property investments:
Geared investment: This is where the
investor borrows money to purchase a property, and then uses the rent from the property to repay the loan.
Interest-only investment: This is where the investor borrows money to purchase a property, and then only pays the interest on the loan each month. The principal amount of the loan is not repaid until the property is sold.
Leveraged property investments can be a good way to grow wealth quickly, but they are also high-risk. Investors should carefully consider their financial situation and risk tolerance before investing in a leveraged property.
Here are some of the advantages of using leverage in property investment:
Increased potential for returns: Leverage can magnify the potential for returns on investment. For example, if an investor borrows $500,000 to purchase a property worth $1 million, and the property value increases by 10%, the investor's profit will be $50,000. However, if the property value decreases by 10%, the investor will lose $50,000.
Tax benefits: In some jurisdictions, investors can claim tax deductions on the interest they pay on their property loans. This can help to offset the cost of
borrowing and increase the potential for returns.