Direct answer
What does Leverage mean?
The use of borrowed money to finance part of an investment.
Exam cue: Leverage can increase returns on equity when results are favorable and magnify losses when they are not.
What does it look like in a question?
New York example
An investor buys a property using 30 percent cash and 70 percent mortgage financing.
Common exam trap
What should you not confuse it with?
More leverage does not automatically create a better investment.
Related commercial and investment terms
Cash flowMoney remaining or changing hands during a period after the receipts and payments included in the stated calculation.Effective gross incomeIncome expected or received after vacancy and collection loss, plus other property income included in the analysis.Gross leaseA lease in which the landlord pays specified property operating expenses from the rent received.LiquidityThe ease and speed with which an asset can be converted to cash without a substantial loss in value.Net leaseA lease under which the tenant pays specified property expenses in addition to rent.Net operating incomeProperty income remaining after vacancy and operating expenses but before debt service and income taxes in the standard real estate formula.
Sources used1 reference with section locators
The curriculum citation confirms exam scope. Definition and rule citations support the explanation itself. Links and locators were checked on August 26, 2026.
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