Leverage is the use of borrowed money to amplify investment returns. In real estate, an investor putting 20% down and borrowing 80% controls an asset five times larger than their cash investment. If that property appreciates 5%, the investor's equity increases by 25% relative to their cash invested. However, leverage is a double-edged sword: it amplifies losses just as effectively as gains. Overleveraging, or taking on too much debt relative to a property's income, is one of the leading causes of investor distress during market downturns. Prudent leverage matched with strong cash flow is the hallmark of sustainable investing.