Gearing %, also known as leverage, is a measure of the amount of debt that is used to finance an investment. It is calculated by dividing the amount of debt by the total value of the investment.
For example, if an investor borrows $100,000 to buy a property worth $200,000, their gearing % would be 50%.
Gearing % is an important metric for investors to consider when evaluating an investment. It can give you an indication of the risk of the investment.
In the context of Core Property and property research, gearing % can be used to:
- Compare different investment properties. By comparing the gearing % of different investment properties, you can get a better understanding of the risk of each property.
- Identify high-risk and low-risk investment properties. Investment properties with high gearing % are considered to be more risky, while investment properties with low gearing % are considered to be less risky.
- Track the performance of an investment property. You can track the gearing % of an investment property over time to see how the risk of the property is changing.
Gearing % is an important metric for investors to consider when evaluating an investment property. By understanding gearing %, you can make informed decisions about your investment.