It may seem logical that the greater the leverage, the greater the cash on cash (COC) return. And you would be right. But it is not linear. A leverage increases, COC increases at at a steepening rate.
As this chart shows, the COC return increases at an increasing rate, in excess of the increasing leverage rate. The greatest jump in COC between 70% and 80% LTV.
Similar results are obtained if the interest rate increases with the leverage.
There you have it - proof of the power of leverage.
Hi! I'm Christine Kwasny.
Why Fall Line?
Fall Line sums up what we live for - skiing and mountain biking. The goal is to maximize our ability to follow our bliss through work that is personally and financially rewarding. So far, so good!