I read an article that listed the presence of wrap notes and recourse loans as "red flags" that a property purchaser could be over-leveraged when purchasing a property. Although I know some professionals are into wrap notes as a creative form of financing, the assumption would be that if a buyer needs to resort to a wrap note as the only method to obtain a loan, or the only loan they can get is a recourse loan, they must be over-leveraged.

Would my fellow professionals on Active Rain agree that wrap notes and/or recourse loans are a sign of over-leveraging? If so, in what way? Are there other signs of over-leveraging that you also watch out for?