Alligator Property


DEFINITION of 'Alligator Property'

In real estate, when the cost of mortgage payments, property taxes, insurance and maintenance on a rental property is greater than the income it brings in. If this situation is not corrected, it will eat up all of the owner's profit, leaving him or her with negative cash flow.

BREAKING DOWN 'Alligator Property'

This occurs more often when a rental property is purchased near the peak of the real estate cycle. In this case, the investor buys the overvalued building and rents it out, but as interest rates rise and maintenance costs add up, the owner is forced to either sell the building or suffer a negative cash flow.

One way to get around the negative cash flow situation is to buy property with a large down payment, thereby reducing the mortgage payment.

  1. Property Tax

    A tax assessed on real estate by the local government. The tax ...
  2. Cash Flow

    The net amount of cash and cash-equivalents moving into and out ...
  3. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  4. Effective Gross Income - EGI

    The amount of income produced by a piece of property, plus miscellaneous ...
  5. Investment Property

    A real estate property that has been purchased with the intention ...
  6. Investment Real Estate

    Real estate that generates income or is otherwise intended for ...
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