Debt to Asset Ratio

Discussion in 'Loans & Mortgage Brokers' started by GalacticExplorer, 22nd Jan, 2017.

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  1. GalacticExplorer

    GalacticExplorer Well-Known Member

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    You guys have inspired me a little. Maybe I am much too conservative. Even if I buy house/something in Brisbane CBD <10km radius using all debt, I would still be under <10% debt to asset ratio.

    I want to accumulate more cash, so I think I might take a 100% LVR, and positively gear, accumulate cash and debt recycle.
     
    GalacticExplorer, 24th Jan, 2017
    #61
  2. Wukong

    Wukong Well-Known Member

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    Job well done to all who's inspired you.
     
    Wukong, 24th Jan, 2017
    #62
  3. sash

    sash Well-Known Member

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    Where are most of your assets in property or shares?
     
    sash, 24th Jan, 2017
    #63
  4. GalacticExplorer

    GalacticExplorer Well-Known Member

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    Overwhelmingly property. Like 90%+. Having said that, I do see the merits of owning good businesses in stocks.
     
    GalacticExplorer, 24th Jan, 2017
    #64
  5. Art Vandelay

    Art Vandelay Well-Known Member

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    Given those numbers you already have ~$4.5M in unencumbered property assuming purchase price for the property in BNE less than 10ks to be city being $500k?
    If that is correct, how have you managed to do so without leverage?
     
    Art Vandelay, 24th Jan, 2017
    #65
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  6. GalacticExplorer

    GalacticExplorer Well-Known Member

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    G-d gave it to us. Good deal of funds came from women's fashion business in the city, but that got wound down and shop got rented out.

    I would be comfortable with taking on a much higher debt to asset ratio of maybe 25% or over when I get cash flow from the current business project underway.
     
    GalacticExplorer, 24th Jan, 2017
    #66
  7. The Y-man

    The Y-man Moderator Staff Member

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    This is what I find fascinating with what people perceive as "risk". For example for me, the words "current business project" scares the bejeezus out of me, whereas obviously you are experienced and comfortable with it.

    Out of curiosity then, does the business have debts in its balance sheet?

    The Y-man
     
    The Y-man, 24th Jan, 2017
    #67
  8. GalacticExplorer

    GalacticExplorer Well-Known Member

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    Zero debt. The projects engaged in typically have very little initial capital outlay. Expenditures would only go up with revenues. Not capital intensive at all.
     
    GalacticExplorer, 24th Jan, 2017
    #68
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  9. The Y-man

    The Y-man Moderator Staff Member

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    Supplementary question if I may :)

    Are you including your share of the business valuation in your debt/asset calculations?

    The Y-man
     
    The Y-man, 24th Jan, 2017
    #69
  10. GalacticExplorer

    GalacticExplorer Well-Known Member

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    No. The business is worth nothing to me until it starts generating profits.
     
    GalacticExplorer, 24th Jan, 2017
    #70
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  11. Iamnumber5

    Iamnumber5 Well-Known Member

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    In fashion industry, the term "one day you are in, one day you are out" is so true.
    I can understand that you don't want to leverage so much on your property investment.
    Is the business based in Sydney?
     
    Iamnumber5, 24th Jan, 2017
    #71
  12. GalacticExplorer

    GalacticExplorer Well-Known Member

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    Yes, this time in inner West.
     
    GalacticExplorer, 24th Jan, 2017
    #72
  13. Realist35

    Realist35 Well-Known Member

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    I'm starting the investment journey and it looks like we are more aggressive than most here.

    The idea is to make the first two purchases at 88% LVR and have buffer in the offset. If we used buffer as deposits, then LVR would be 80%. However we figure it's safer to keep cash for just in case:).
     
    Realist35, 29th Jan, 2017
    #73
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  14. GalacticExplorer

    GalacticExplorer Well-Known Member

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    I don't get it. Doesn't the LMI protect the lender?
     
    GalacticExplorer, 30th Jan, 2017
    #74
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