A Guide to Levered & Unlevered Returns

Do you know the difference between levered and unlevered returns? This is especially relevant for real estate – the largest asset class globally, since most of the real estate transactions involve leverage.

Levered_VS_Unlevered

Professional investors use debt to increase potential returns on their real estate investments. Private individuals use mortgages to buy their dream homes. In both cases, these loans amplify potential gains (and losses) and, therefore, provide leverage to the investors.

Imagine your home's value increases by 10%. If the home was initially worth 100% and financed with 70% mortgage and 30% your own funds, its new value is 110%. After repaying the 70% mortgage, your equity share would increase from 30% to 40% of the home's value, marking a 33% increase in your home equity vs 10% growth in home value.

8FIGURES app enables you to better understand your real estate exposures by automatically calculating all the important metrics including:

  • Price per sqft / sqm
  • Home Equity
  • Levered and unlevered returns including IRR
  • Mortgage payments and outstanding mortgage balance

Additionally, you can link your US real estate via Zillow to get up-to-date home value estimates (Zestimate).

Take control of your real estate investments like never before. Download the 8FIGURES app today and start optimizing your portfolio.

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