Hello, the mock exam states that the use of financial leverage in direct RE is an advantage, not a disadvantage.
Could someone clarify for me why it is an advantage? More debt is not an issue?
Are they saying that you’re able to control the RE with less actual ownership, thus it is a good thing? Thanks
Full disclosure that I got this one wrong the first time too. Being able to leverage the position means greater return on equity, which is an advantage. Or think about your own life, if you want to go buy a house, its a good thing to be able to get a mortgage so you can decrease your initial outlay, right?
2008 Financial Meltdown … was why?.. simply put “leverage” but CFAI says it is an advantage then that is what you answer with… Guess as long as you earn more on it than cost of borrowing then absolutely makes sense but as long as you can afford the leverage 
I get your point but they aren’t saying that leverage is implicitly good, just that it is advantage to the investor to have that tool available.
Fair enough. Thanks