Alligator Property Law and Legal Definition

“Alligator property” is a term in used 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, the property owner will be left with negative cash flow. This occurs more often when a rental property is purchased near the peak of the real estate cycle. Under such circumstances, the investor buys the overvalued building and rents it out. However, as interest rates rise and maintenance costs add up, the owner is forced to either sell the building or suffer a negative cash flow. In order to get around the negative cash flow situation, the property can be bought with a large down payment, thereby reducing the mortgage payment.