What is the Leverage Calculator?

The Leverage Calculator shows how using debt affects investment returns, comparing leveraged vs. unleveraged scenarios and measuring return amplification.

How does leverage amplify returns?

Leverage amplifies returns by controlling more property with less cash. A 20% down payment controls 5x your capital, multiplying gains (and losses).

Loan-to-Value ratio is the loan amount divided by property value. Higher LTV means more leverage. 80% LTV is common for investment properties.

What are the risks of high leverage?

Risks include amplified losses, negative cash flow if rents drop, difficulty refinancing if values fall, and potential foreclosure in severe downturns.

Free Calculator

Leverage Calculator

Compare investment returns with and without financing. Understand how leverage amplifies both gains and risks in real estate investing.

Investment Details

Enter property and financing information

Property Value

Down Payment / Cash Investment

Annual Net Operating Income (NOI)

Interest Rate (%)

Appreciation (%/yr)

Leverage Analysis

Compare leveraged vs unleveraged returns

Leverage Effect

Negative Arbitrage

Cap Rate (0.00%) < Interest Rate (7.0%)

With Leverage

0.00%

Cash-on-Cash

All Cash

0.00%

Cash-on-Cash

Loan Amount$0

LTV Ratio0.00%

Annual Debt Service-$0

Leveraged Cash Flow$0

Total Return (w/ appreciation)0.00%

Leverage amplifies returns but also increases risk. Negative cash flow can occur if expenses exceed income.

How It Works

1. Enter Investment Details

Input the property value, your down payment, NOI, and current interest rates.

2. Compare Returns

See side-by-side cash-on-cash returns for leveraged vs. all-cash scenarios.

3. Analyze Arbitrage

Determine if the deal has positive arbitrage where cap rate exceeds your borrowing cost.

Frequently Asked Questions

Understanding Real Estate Leverage and Investment Returns

Leverage is one of the most powerful tools in real estate investing, allowing you to control valuable properties with a fraction of the purchase price. Our leverage calculator helps you understand exactly how financing affects your investment returns and when using leverage makes financial sense.

The Power of Positive Arbitrage

The key to successful leveraged investing is positive arbitrage - when your property's income (measured by cap rate) exceeds your borrowing cost (interest rate). When this condition is met, every dollar you borrow actually increases your cash-on-cash return. This calculator instantly shows whether your deal achieves positive arbitrage.

Balancing Returns and Risk

While leverage can significantly boost returns, it also increases risk. Higher debt means higher fixed obligations, reducing your margin for error. Interest rate changes, vacancy periods, and unexpected expenses all have a greater impact on leveraged investments. Smart investors use leverage strategically, maintaining adequate reserves and avoiding over-leveraging.

Total Returns: Cash Flow Plus Appreciation

This calculator shows both cash-on-cash returns (from income) and total returns (including projected appreciation). For many investors, appreciation is the primary wealth builder, and leverage amplifies these gains. However, appreciation is never guaranteed, so conservative investors focus first on cash flow and treat appreciation as a bonus.