What's wrong with the house analogy for LBOs?
Here's a common analogy people use to explain LBOs to laymen:
A house costs $100 to buy - financed using 90% of debt and 10% of equity. The owners buy the house and then rent it out for $25 dollars a year and use those $25/year to pay down debt. After 3 years, the owners sell the house for 100 dollars and now get $25 of equity. So MoM is 2.5x since they started out with $10 of equity.
However, I was recently told that there were issues with this analogy but wasn't told why.
What's the reason?