Comments on: What’s ‘Good’ Leverage? Maybe Not What You Thought http://www.biggerpockets.com/renewsblog/2010/03/02/whats-good-leverage-maybe-not-what-you-thought/ Learn, Network, Invest Sat, 11 Feb 2012 20:37:50 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Richard Warrenhttp://www.biggerpockets.com/renewsblog/2010/03/02/whats-good-leverage-maybe-not-what-you-thought/#comment-79808 Richard Warren Wed, 03 Mar 2010 17:55:16 +0000 http://www.biggerpockets.com/renewsblog/?p=11526#comment-79808 Well said.People need to remember one thing: THERE IS NO GOOD DEBTHow often have you heard people say, “yeah, but it’s good debt.”? Debt may be necessary, but it’s a necessary evil. Understanding that leverage is a double-edged sword, not only does in magnify your gains, it also magnifies your losses. Well said.

People need to remember one thing: THERE IS NO GOOD DEBT

How often have you heard people say, “yeah, but it’s good debt.”? Debt may be necessary, but it’s a necessary evil. Understanding that leverage is a double-edged sword, not only does in magnify your gains, it also magnifies your losses.

]]> By: BawldGuy Talkinghttp://www.biggerpockets.com/renewsblog/2010/03/02/whats-good-leverage-maybe-not-what-you-thought/#comment-79800 BawldGuy Talking Wed, 03 Mar 2010 15:21:23 +0000 http://www.biggerpockets.com/renewsblog/?p=11526#comment-79800 Steve -- I'm guilty of those exceptions. I would say, however, that in the end, if the yield is higher than the cost of the borrowed money, well, positive leverage is positive leverage, right? :)As I'm sure you have, I've jumped out of perfect good airplanes with one chute, no backup, and made out like a bandit. The thing about leverage? It's no respecter of circumstances. It's like gravity -- it works whether or not we even know of its existence. It can be our friend, or it can crush us like a grape. Steve — I’m guilty of those exceptions. I would say, however, that in the end, if the yield is higher than the cost of the borrowed money, well, positive leverage is positive leverage, right? :)

As I’m sure you have, I’ve jumped out of perfect good airplanes with one chute, no backup, and made out like a bandit. The thing about leverage? It’s no respecter of circumstances. It’s like gravity — it works whether or not we even know of its existence. It can be our friend, or it can crush us like a grape.

]]> By: Stevehttp://www.biggerpockets.com/renewsblog/2010/03/02/whats-good-leverage-maybe-not-what-you-thought/#comment-79794 Steve Wed, 03 Mar 2010 08:06:10 +0000 http://www.biggerpockets.com/renewsblog/?p=11526#comment-79794 Good post. Like Rich Dad said, "how many deals can you do at -$100 per month"? There is a limit. "How many deals can you do +$100 per month"? There is no limit, as many as you can find.That being said, there are certain limited scenarios where I would put up with negative cash-flow. Big principal pay-downs (ie. I did a deal, owner carried at 100,000 at 100 payments of $1,000/month), the property rented for $1,500. Smaller loser, with expenses, but I am banking long-term. Or in a temporary financing scenario. IE: hard money loan while I rehab it and finance it to better positive cashflow rate. .-= Steve´s last blog ..<a href="http://buildbankroll.com/2010/03/february-2010-goal-review/" rel="nofollow">February 2010 Goal Review</a> =-. Good post. Like Rich Dad said, “how many deals can you do at -$100 per month”? There is a limit. “How many deals can you do +$100 per month”? There is no limit, as many as you can find.

That being said, there are certain limited scenarios where I would put up with negative cash-flow. Big principal pay-downs (ie. I did a deal, owner carried at 100,000 at 100 payments of $1,000/month), the property rented for $1,500. Smaller loser, with expenses, but I am banking long-term. Or in a temporary financing scenario. IE: hard money loan while I rehab it and finance it to better positive cashflow rate.
.-= Steve´s last blog ..February 2010 Goal Review =-.

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