Real Estate & REITs
Show with a simple one-year example why levered IRR exceeds unlevered IRR when the deal works.
Model answer
Buy a $100 property with $6 of NOI, hold one year, sell at $100. Unlevered: invest $100, receive $6 of NOI plus $100 at exit = 6% return. Levered with $50 of interest-only debt at 4%: equity is $50;…
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