Optimal Leverage in Real Estate Investment
John F. McDonald
The Journal of Real Estate Finance and Economics, Vol. 18, No. 2, March 1999
This article is a theoretical examination of optimal financial leverage for real estate investment in the presence of uncertainty. The main results is to show 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 calcualtions for both borrower and lender.
JEL Classification: R29, R39Accepted Paper Series
Date posted: November 18, 1999
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