Wrestlers and black belts in judo know how important leverage is to winning a match. Even physically weaker or smaller contestants can prevail, if they get the angles and the momentum working in their favor.

The same is true for people who borrow money to make an investment, whether that is to buy a corporation or a car. When the investment is going up in value, leverage can turn a small investment into a big profit. When it is going down, leverage gouges investors.

People who have bought a home in recent years are finding that out the hard way.

As I warned in a 2005 column, spending hundreds of thousands of dollars on a house, with only a few thousand down can be a risky endeavor thanks to leverage, if you aren't able to wait until things turn around.

The way things usually work, leverage helps home buyers . Say you buy a $200,000 house with 20 percent down. You have to come up with $40,000.

If the value of that house goes up to $250,000, you'll walk away from a sale with $90,000. That's a 125 percent return on the initial investment. (This excludes fees, interest, etc., for the sake of convenience in making my point.)

That kind of potential return had people buying houses on speculation nationwide.

Unfortunately, the median housing price in Maine has dropped 5.7 percent year-over-year, in the most recent report issued by the Maine Real Estate Information System, which is sponsored by Realtors. That's a loss of $11,400 on the hypothetical house purchased for $200,000 in 2007 -- a 28.5 percent decline on the investment.

In those places where prices have declined more sharply, people owe more money than they have invested in the house. It's like buying pork bellies on margin, and then seeing the market fall through the floor.

Not only did their investment produce a negative return. These investors have to dig into their own pockets to come up with the difference, if they can.

This phenomenon helped create to the foreclosure crisis that is driving many of the financial problems that our country has encountered.

Of course, most people don't buy houses on speculation. They plan to live there for some time, and they get the benefit of a roof over their heads. And, over time, a single-family home has proven to be a great investment.

The power of leverage, though, should be kept in mind by anybody who is looking to flip properties or live there for a short period of time.

Leverage can turn a small decline in prices into a big loss on your investment, if you aren't careful.

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