Yusra3
VIP Contributor
When you leverage in real estate investing, you are essentially borrowing money to finance your investment. And as with any type of borrowing, there is always the risk that you will not be able to repay the loan. There are two main types of risks associated with leverage in real estate investing:
1. Interest Rate Risk
This is the risk that interest rates will rise, and your monthly mortgage payments will increase accordingly. If you're leveraged in a property, it's important to make sure that your rental income can cover the increased mortgage payments if interest rates do go up.
2. Property Value Risk
This is the risk that the value of your property will decrease, and you'll end up owing more on your mortgage than the property is worth. This is especially a concern in volatile markets or when taking out a Balloon Mortgage where the loan balance is due in full at a certain point (usually 5-7 years).When you leverage in real estate investing, you are essentially borrowing money to finance your investment. And as with any type of borrowing, there is always the risk that you will not be able to repay the loan.
1. Interest Rate Risk
This is the risk that interest rates will rise, and your monthly mortgage payments will increase accordingly. If you're leveraged in a property, it's important to make sure that your rental income can cover the increased mortgage payments if interest rates do go up.
2. Property Value Risk
This is the risk that the value of your property will decrease, and you'll end up owing more on your mortgage than the property is worth. This is especially a concern in volatile markets or when taking out a Balloon Mortgage where the loan balance is due in full at a certain point (usually 5-7 years).When you leverage in real estate investing, you are essentially borrowing money to finance your investment. And as with any type of borrowing, there is always the risk that you will not be able to repay the loan.
