5 Signs a Real Estate Deal Is Overleveraged Most investors look at debt as a way to increase returns. But leverage works both ways. It can amplify the upside. It can also eliminate your margin for error. When we evaluate a real estate deal, we’re not just asking, “How much can we borrow?” We’re asking, “Can this property comfortably carry the debt when things don’t go according to plan?” Here are 5 warning signs we pay attention to: Thin debt service coverage. If cash flow barely covers the loan payments, one operational setback can create pressure. Minimal cash reserves. Repairs, vacancies, and unexpected expenses happen. A deal needs liquidity to absorb them. Dependence on aggressive rent growth. If the investment only works because rents have to increase significantly, the margin for error is already thin. Short debt maturity. A strong property can become a bad investment if you’re forced to refinance at the wrong time. Everything has to go right. This may be the biggest red ...