Debt-to-Equity Ratio

Debt-to-equity ratio measures the proportion of debt financing relative to equity in a property investment, indicating financial leverage and risk level.

CalculationFormula
Debt-to-equity ratioTotal debt / Total equity
Example: 75% LTVAED 7.5M debt / AED 2.5M equity = 3.0x
Example: 50% LTVAED 5M debt / AED 5M equity = 1.0x
Example: All-cashAED 0 debt / AED 10M equity = 0x
Alternative expressionDebt / (Debt plus Equity) = LTV
Higher ratioMore leverage, higher risk and return potential
Typical Ratios by StrategyDebt-to-Equity
Core (low leverage)0.5x to 1.0x (33% to 50% LTV)
Core-plus1.0x to 2.0x (50% to 67% LTV)
Value-add1.5x to 3.0x (60% to 75% LTV)
Opportunistic2.0x to 4.0x (67% to 80% LTV)
Risk toleranceInstitutional investors prefer under 2.0x

Related Terms

Loan-to-Value (LTV)LeverageLeverage RatioCounterparty RiskRisk-Adjusted ReturnRisk-Adjusted ReturnCapital StructureFinancial RiskGearing Ratio

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