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Leverage is an essential concept in commercial real estate investing. It refers to the use of borrowed funds to acquire a property or increase the potential return on an investment. Leverage can be a powerful tool for investors to increase their buying power and maximize their returns, but it also comes with risks.

One of the primary benefits of leverage is that it allows investors to purchase properties that they may not be able to afford with cash alone. By using borrowed funds, investors can increase their buying power and acquire properties with a smaller down payment. This means that investors can leverage their existing assets to acquire new properties and increase their overall portfolio value.

Leverage can also help to increase the potential return on an investment. By using borrowed funds, investors can increase their cash-on-cash return and overall return on investment. This is because the cost of borrowing is typically lower than the expected return on the 

investment. However, it is important to note that the use of leverage also increases the risk of the investment, as any losses will be amplified by the use of borrowed funds.

Investors should also be aware of the risks associated with leverage. If the value of the property decreases, the investor may be unable to repay the borrowed funds, leading to a potential default on the loan. Additionally, the use of leverage can lead to higher interest expenses and debt service payments, which can impact the investor’s cash flow.

Overall, leverage is a powerful tool in commercial real estate investing that can help investors maximize their returns and increase their buying power. However, it is important to use leverage responsibly and understand the associated risks.