Debt to Asset Ratio

Depends on the net income
A commercial property that is vacant (and could remain vacant for a long time) or a landbanking situation even with zero debt usually has a massive cashflow drain so even 1pc could be too high.

 

Am at 70% and would increase it with the right opportunity.

Rather than interest rate levels, the goal is having X dollars at retirement.

If you're going to hit your desired retirement income at your desired retirement age with 10% leverage, go for it.

Some of us here want an above average retirement income for an above average retirement lifestyle. There needs to be some aggressive calculated risk taking at the right time.

Run your own race.

 

I'm at ~65% with a decent cash buffer (enough to keep things ticking over for 12 - 18 months should an income be compromised).

I would be happy to push this out to ~80% should the opportunity arise.

 

This is something I'm trying to work on too.

That said, I'm still in acquisition-mode in portfolio building. Once buying is done (all things going well, that should be arpund end 2017 or early 2018 - FYI I have been actively buying for almost 10 years since early 2008), improving the overall debt ratio will be the aim of the game.

To do this, 2018 will probably be a year of pulling back on indulgences (as opposed to 2017 which is looking to be a bit of a splurge - a frugalist's version of a splurge anyway! Some international holiday/family travel, and a couple of purchases).

If I can finish buying this year, 2018 will be about saving every penny possible from work and whacking it into the offsets. Plus, some planned rental increases should also combine to get my LVR into a healthier position. It is currently 79.1 / 20.9 (based on most recent round of formal valuations). By end 2018 the goal is to get closer to that 70/30 number.

Of course, global/local interest rate movements will influence this a lot.

 

Why not?

Rental income is more reliable than most employment income.

To lose my rental income I would have to lose 12 tenants all at once. To lose my employment income I have to lose 1 job.

 

25% equity to 75% debt, and we are talking about nearly 3 million total value.

 

Portfolio currently sitting at 60% LVR and cashflow positive by about $15K per year. Then use one of our two PAYG salaries to reduce debt. I have capped our variable interest rate loans at $3m and all others are fixed.

 

71% LVR over investments (Property, Shares, Cash)
80% Lvr including PPOR
investment portfolio positively geared.
I'm comfortable with investment LVR.
I'm actively reducing PPOR LVR through debt recycling methods. I'm also still fairly early in my investment journey - with lots of compounding still to go.

 

Yes I think I have been too conservative, currently all my holdings are in inner Sydney & CBD so yields are low at about 4 to 4.5% in total.

I am itching to expand to other capitals to help diversify holdings, but will likely only do so when I secure A-grade properties in those areas. Brisbane looks very appealing to me with its economic and population growth, but those flood zones seem to be everywhere!

I would be looking to purchase a house within a Km radius in the single digits of a capital's CBD.

 

Once we've finished our current renovation and revalued it will be around 85%. Mid twenties with good income so well and truly in be acquisition / value add phase. All purchases have been at 88-90%lvr and have released equity on one after our first renovation back up to 90%, so being at 85% in the next few weeks will be good.

 

30 years old and after settlement the properties would be around 80% LVR but we were at about 50% before.

It depends on what stage of life you are and and your future plans. We are in acquisition phase where as someone in their 60s would probably be looking at holding and reducing debt.

Yes I would love zero debt but if I had zero debt I have zero leverage which is what I am using. To accelerate our financial independence, last year from my office I would of increased my net worth either the most or one of the very top hit my income is not the highest in the office.

Property you can make money while you sleep (just like businesses and shares). Where as having a paid job you only get paid when you work.

 

Agree with this, all to their own

 

My wife and I were at below 50% prior to 2015. Bought 4 in blue chip areas and our lvr was at 80% after but a combination of buying below market value and passive market movement our lvl is now below 70% not having to do much.
I believe over caution is just as dangerous as under caution. If one is over caution and not willing to take risk, one must take what is left over once everyone else had a chance to pick from the table.

 

My debt:asset ratio is currently at 56%, with property component of my portfolio at 74%. I consider my strategy very conservative for someone still in the growth stage!

 

True the rental is mostly reliable, but unlike an IP a job does not lock you into massive debt and cost obligations such as interest payments, council rates, management, insurance, and repairs.

 

Also agree that 10% is a waste of time and paperwork. A credit card could cover that

 

Yes and no. A job sometimes requires you getting a property close to the cbd which is a more expensive financial obligation.

Plus you might need a car to do your job. Then if you are a tradie you need to outlay for tools as well, and you might need to pay ongoing registration, licenses, insurances etc...

So a job isnt without financial obligation either. I get your point though.

 

After a binge of buying my debt to asset ratio (LVR) has moved to 40%.

However, if I add other assets in it drops to about 35%.

As others have said carry lots of cash...so you can ride the bumps.

10% debt to asset ratio is extremely risk averse. That in itself can be a risk as others have pointed out that if your assets don't grow you eventually run out of money particularly if you are retired and pulling down on assets....

 

LVR ratio -and level of risk depends on many things,
some of these including;
where your properties are located (risks of bad tenants etc),
how much cashflow they provide,
how your loans are set(fixed or not,and when/what stage they go to P&I in relation to rest of portfolio)and which product etc,
how much cash buffers you carry,
if some are commercial -do you have the ability to repay them if the bank requires in downturn,
etc etc
So its not so much the LVR but what yr portfolio is made up of how much it reliably cashes you