Which of the following describes a ratio that measures financial leverage in real estate?

The debt-to-value ratio is specifically designed to assess financial leverage in real estate. This ratio indicates the proportion of a property’s value that is financed through debt, reflecting how much of the asset’s value is leveraged against borrowed funds. A higher debt-to-value ratio implies greater financial risk since it shows a larger portion of the asset is financed through debt, which can be significant in fluctuating market conditions.

In contrast, the income multiplier measures how effectively a property generates income relative to its price, the capitalization rate reflects the expected rate of return on a real estate investment based on its net operating income compared to its purchase price, and the return on investment ratio evaluates the gain or loss generated relative to the investment made. While these metrics are important in real estate analysis, they do not specifically address financial leverage as the debt-to-value ratio does.