Positive / negative carry

Positive carry — the property’s cap rate exceeds the total financing cost: the spread is yours, and the tenant amortizes your loan on top of it. Negative carry — financing cost exceeds the cap rate: you pay every month to own, betting appreciation outruns the bleed. The PH trap in one line: Manila condos net ~3–4.5% while mortgage money costs ~6.5–8%+, so the vanilla leveraged condo is negative carry by 2–5 points — which is why Level 3’s escapes exist. In the Philippines positive carry is not found; it is manufactured.

First used in: 3.1 · Leverage: the sword’s both edges