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Optimal Leverage in Real Estate Investment

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Abstract

This article is a theoretical examination of optimal financial leverage for real estate investment in the presence of uncertainty. The main result shows that uncertainty creates the possibility that a borrower will default on a real estate loan and that this possibility is the underlying factor in optimal leverage calculations for both borrower and lender.

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Authors and Affiliations

  1. Departments of Economics and Finance, University of Illinois at Chicago, 601 South Morgan Street, Chicago, IL, 60607

    John F. Mcdonald

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  1. John F. Mcdonald
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Mcdonald, J.F. Optimal Leverage in Real Estate Investment. The Journal of Real Estate Finance and Economics 18, 239–252 (1999). https://doi.org/10.1023/A:1007722826517

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  • DOI: https://doi.org/10.1023/A:1007722826517

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