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The entire reason that leveraging up real estate 5x is a widely accepted practice is that you can't get margin called as long as you keep making payments. Reg T
by ceeplusplus 4y ago
The entire reason that leveraging up real estate 5x is a widely accepted practice is that you can't get margin called as long as you keep making payments. Reg T margin will margin call you if you go under 25-50% equity, but mortgages will never margin call you.
- cellis 4y agoI meant "margin called" figuratively, not literally. Essentially investors will start seeing negative cap rates and either demand redemptions or will start liquidating their RE portfolios, which isn't a real margin call, but "margin call" is a convenient term for what's happening. Also, carrying costs of vacant properties are high. I'm predicting large writedowns of RE, and especially commercial RE in the coming 5 years.