negative/positive leverage
Positive leverage means debt costs less than the asset yield and boosts equity returns. Negative leverage means debt costs more than the asset yield and drags returns.
Why it matters
negative/positive leverage changes what a disciplined buyer can pay, how much debt the asset can safely carry, and whether the return is coming from operations or fragile assumptions.
Worked example
In underwriting, tag negative/positive leverage beside the exact source input and rerun the model when that input changes. The point is not a pretty metric; it is a better buy, hold, refinance, or walk decision.
How investors read it
Debt should make a solid deal more efficient, not hide a weak one. If the asset fails unlevered, leverage usually makes the failure arrive faster.
Common mistakes
- · Treating the metric as a verdict instead of a screen.
- · Using broker-package assumptions without checking the source documents.
- · Ignoring taxes, capex, vacancy, financing terms, and timing.
Use current local data and source documents. Realist should show assumptions and date-stamp market inputs because stale inputs create fake precision.