Leverage Impact On Returns Calculator

Leverage is a two-edged sword — amplifies gains and losses.

Property return %

Cost of debt %

LTV %

Equity return %

0.12%

Leverage ratio

1.86

Property vs debt spread

0.02%

How the math works

Equity return = property return + spread × leverage ratio. Leverage = LTV / (1 − LTV).

8% + (8% − 6%) × 1.857 (65% LTV) = 8% + 3.7% = 11.7% levered equity return.

How to Use

Enter property return %.
Enter cost of debt %.
Enter LTV %.
Read equity return.

Frequently Asked Questions

Leverage math?

Equity return = property return + (property return − cost of debt) × leverage ratio. Leverage ratio = LTV / (1 − LTV). 60% LTV = 1.5 leverage. 75% LTV = 3.0 leverage.

Optimal leverage?

As leverage rises, expected return rises but volatility/risk rises faster. Core: 50-60% LTV. Value-add: 65-75%. Opportunistic: 70-80%. Covenant math usually caps practical leverage regardless of strategy.

Stress scenarios?

Always model leveraged returns under stress. 60% LTV property falls 20% in value = 50% equity loss. 75% LTV property falls 20% = 80% equity loss. Leverage amplifies downside dramatically; size debt carefully.

What does competitive benchmarking look like?

Pull 3-5 comparable properties or units in your submarket from CoStar, Yardi, CIM, or your local broker. Normalize by unit type, class, and age. Your outputs should fall within one standard deviation of the comp-set mean. Outliers are either opportunities or warning signs — dig into why. Monthly benchmarking keeps your portfolio on-market and pricing sharp.