The more someone has been trained in creating wealth through property investment, the more they look to focus on maximising leverage to magnify success. Amplification of the movement up; cash on cash return; return on the cash invested.

But what happens when values drop and the property is highly leveraged? As some have said, leverage is a double-edged sword and it cuts both ways; magnifying the good and the bad; having your cash wiped out quickly and facing repossession rather than riding out the temporary down draft.

What would the Queen do?
Over a year ago, I ran a session at a monthly meeting that I host and asked the investors in the room to think about how to invest if they had unlimited cash with more money than they could comfortably invest at any one point. To a person, they kept coming back with how to raise more capital by using debt. The stated issue to the room was about having 'too much cash' and yet they kept focusing on how then to increase the cash pile with debt. Solving the wrong problem and not knowing they were doing so.

To sift their thinking I said: "Pretend you were the Queen. You have too much cash. You want income. Increasing the Queen's total wealth is not helpful. Why would you leverage up? Why sacrifice income so you can take on debt? Why have more tenants to deal with and other sorts of issues when you cannot use all the cash that you already have?" It was only then that people started to understand that debt is a tool and it is not a tool that always needs to be used when buying property.