Leverage Ratio
Leverage ratio measures the proportion of debt financing relative to total property value or equity, determining financial risk and return magnification.
| Leverage Metric | Formula |
| Loan-to-value (LTV) | (Loan amount / Property value) times 100 |
| Debt-to-equity | (Debt / Equity) times 100 |
| Equity ratio | (Equity / Property value) times 100 |
| Leverage factor | Property value / Equity |
| Leverage Impact on Returns | Example |
| No leverage (100% equity) | Return = property return |
| 50% leverage (50% LTV) | Return = 2x property return minus debt cost |
| 75% leverage (75% LTV) | Return = 4x property return minus debt cost |
| Negative leverage risk | If property return below debt cost |
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