How Not to Overleverage Yourself (and Survive a Soft Market)
The fastest way to lose money in real estate isn't a bad property—it's too much debt on a decent one. Leverage amplifies your return when things go right and your losses when they don't. The goal isn't maximum leverage; it's the leverage you can carry if the deal takes longer than planned.
Underwrite the downside first
Before you ask how much you can borrow, ask what happens if the property sits for six extra months or the exit value comes in 10% light. Run the deal at a conservative ARV and a longer hold. If it still survives, the leverage is probably safe. If it only works at the optimistic numbers, you're overleveraged.
Keep a carry reserve
Always hold reserves to cover several months of payments, taxes, and insurance beyond your projected timeline. On a flip or a build, the most dangerous moment is the gap between 'done' and 'sold.' Reserves are what turn a delay into an inconvenience instead of a default.
This is also where structure matters: interest reserves and interest-only periods reduce monthly carry so a timing slip doesn't force a fire sale. We'll model the conservative case with you before you commit.
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