Loss-Recovery Asymmetry & Survival

Calculates the gain needed to recover a given loss of capital and the equity cushion that survives a value decline at a given leverage level. The inputs are the loss percentage and the loan-to-value ratio.

Interactive Tool

Recovery math

Loss of capital

Gain needed to break even

100%

1 ÷ (1 − 0.50) − 1

25% lossneeds33% gain

50% lossneeds100% gain

75% lossneeds300% gain

90% lossneeds900% gain

Equity cushion (survival)

Loan-to-value

Value decline that wipes out equity

35%

1 − LTV = 1 − 0.65

Losses are asymmetric, so survival comes before upside. Lower leverage widens the cushion: at 65% LTV the equity absorbs a 35% value decline; at 80% LTV, only 20%. Protect the downside first, then pursue value-add.

Learn the concept

This calculator comes from the free Real Estate Finance course, where the concept is taught with readings, worked examples, and practice questions.

Open Real Estate Finance

Built by Devon Coombs, CPA, MBA, Teaching Professor of Finance at Santa Clara University.