In one sentence
The annual debt service on a loan divided by the loan amount, expressing the total cost of debt as a single rate.
The longer version
The debt constant, or mortgage constant, combines interest and amortization into one figure: annual debt service as a percentage of the loan. It lets lenders and investors compare the true annual cost of loans with different rates and amortization.
Comparing the debt constant to a property's cap rate reveals whether leverage is accretive: positive leverage exists when the cap rate exceeds the debt constant.
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