Define: Alligator Property

Alligator property, also known as alligator investment or alligator property syndrome, refers to real estate or other investment properties that become financially burdensome for their owners due to high maintenance costs, low rental income, or other factors that outweigh the property’s profitability. The term “alligator” is used metaphorically to describe a situation where the property consumes more money than it generates, akin to an alligator consuming its prey. Alligator properties often arise when investors purchase real estate without thoroughly assessing its potential risks or when economic conditions change unfavorably, leading to declining property values or increased expenses. Dealing with alligator properties typically involves strategies such as refinancing, renovation, resale, or relinquishing ownership through foreclosure or short sale to mitigate financial losses.

A property which was purchased at the apex of a real estate cycle and becomes a financial liability due to mortgage payments, property taxes, insurance and maintenance fees outweighing its generated income, causing the owner to incur a negative cash flow.

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This glossary post was last updated: 29th March 2024.