I’ll give you an example. **The money you have is $1** and let's look into the next two options. And let's **suppose house prices go up by 10 percent overall**.

1. **Buy a $1 house** => Rise to $1.10 => Earn 10 cents from a $1 investment => **Yield 10%.**

2. Get a $9 loan and buy a $10 house with my $1 => The house price goes up to $11 => Pay back the $9 loan and the remaining $2 => Invest in $1 and earn $1 => **Yield 100%.**

(Of course, you'll have to consider the interest rate because you'll have to pay the interest on the loan. For an easy example, interest rates are not considered).

This is called the **leverage effect.** So the appropriate debt ratio is a positive view.