Property · 05

Property is a leveraged bet. Here is the IRR.

A mortgage is leverage. Four per cent property appreciation on a twenty-five per cent deposit becomes sixteen per cent on your equity. Plus rent. Minus mortgage interest. The maths the property salesman will not show.

Currency

The property

Price, deposit, financing, growth expectations, and hold horizon.

Net rental yield after letting fees and maintenance, as a percentage of purchase price. Leave at zero for a primary-residence calculation.

IRR on your equity
3.6%

4.0× leverage on 4.0% appreciation

Equity invested
£125,000
Final equity
£177,622
Leverage multiplier
4.0×
3.6% IRR on equity. Your £125,000 deposit becomes £177,622 over 10 years. The 4.0× leverage multiplies both gains and losses: 4.0% property appreciation drives the equity return well above the headline. Ignores transaction costs, maintenance, and vacancy; real-world IRR runs two to four points lower.

Illustrative figures only. Interest is modelled as simple principal times rate times years, which overstates total interest on a typical capital-repayment mortgage. Transaction costs, vacancy, and maintenance are not modelled. For your specific situation, consult a qualified adviser.

Leverage, both ways.

Worth carries the leverage maths into every property decision: own home, BTL, second home. The IRR before fees, the IRR after, and the downside scenarios most buyers do not run. Join the waitlist.

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Frequently asked questions

Why is leverage cheaper for housing than for stocks?

Banks lend at low rates against property because they can seize it on default. Margin loans against stocks cost roughly twice as much. That is the structural advantage of property as an asset class: you can borrow large sums at relatively low cost. It is also why so many people end up over-allocated to property despite its weaker fundamentals on price-to-rent.

What about leveraged ETFs on the S&P 500?

Leveraged ETFs (UPRO, TQQQ) provide two or three times daily leverage but suffer volatility decay that erodes returns over multi-year holds. Direct margin loans cost more than mortgages. Property leverage at modest rates on an appreciating, taxable-shelter-eligible asset is structurally cheaper. Property is also illiquid; stocks are not.

What does the calculator skip?

Transaction costs (stamp duty or closing costs, sale fees), maintenance, vacancy, void periods, and tax on rental income. Real-world IRR is typically two to four points lower than the model shows. For a UK BTL view that adds these in, use the UK Buy-to-Let calculator.

When does leverage cut against you?

In a downturn. A twenty per cent fall in price on a twenty-per-cent deposit position wipes out the equity entirely. Property values fell more than that in many markets in 2008-2011; leveraged buyers with five-to-ten-per-cent deposits were underwater for years. Leverage amplifies both directions equally.