http://asotreg.disqus.com/enThu, 17 Dec 2009 13:56:29 -0000http://www.astudentoftherealestategame.com/2009/03/23/builders-corner-negative-leverage/#comment-26159031<p>I think you chose not the easiest way to explain the idea of negative leverage. It would be much easier to compare RoA/Cap Rate (10% and 8,5% in your two scenarios) with the effective interest rate paid over the period. In the first case is 8,48% (which is lower than 10%, so the levarage is positive) while in the second case the int rate paid is 8,67%, which is higher than return on asset, then the negative leverage. The formula is <br>RoE = RoA +(RoA-interest rate)*(Debt/Equity)</p><p>To calculate the effective interest rate you just need the usual interest amortization tables or calculate the total annual debt payment. Hope this helps.</p>lorenzoThu, 17 Dec 2009 13:56:29 -0000http://www.astudentoftherealestategame.com/2009/03/23/builders-corner-negative-leverage/#comment-9725862<p>I like ur leveraged bits. One would never think of a reason not to be so leveraged.</p>johnTue, 24 Mar 2009 00:49:06 -0000http://www.astudentoftherealestategame.com/2009/03/23/builders-corner-negative-leverage/#comment-9725861<p>Do you do blogroll exchanging? If you want to exchange links let me know.</p><p>Email me back if you're interested.</p>Susan KishnerMon, 23 Mar 2009 10:47:50 -0000