Optimal Leverage in Real Estate Investment

Posted: 18 Nov 1999

See all articles by John F. McDonald

John F. McDonald

University of Illinois at Chicago


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, R39

Suggested Citation

McDonald, John F., Optimal Leverage in Real Estate Investment. Available at SSRN: https://ssrn.com/abstract=181317

John F. McDonald (Contact Author)

University of Illinois at Chicago ( email )

Chicago, IL 60605
United States
312-281-3287 (Phone)
312-281-3123 (Fax)

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