How much leverage would/do you feel comfortable with?

http://news.domain.com.au/domain/re...as-banks-tighten-lending-20150810-givb1c.html

I was reading this article and thought to myself I probably wouldn't feel comfortable with such a high LVR on a portfolio that size. Seems pretty reckless if you ask me, a 10% fall would wipe out any equity and put him in the red by probably half a years gross salary (without taking into consideration stamp duty, LMI & legals spent + agent fee to sell). Some would be fine riding this out (without needing to sell even if went into the red), but in sales at a software firm in Adelaide... not much around if anything changes and he has to drop rents or 1-2 are vacant for a period of time.

Do you have any rules / equations for working out the debt you feel comfortable carrying or is it just all guns blazing, borrow as much as the banks lets me, let the chips fall where they may?

My thinking is that some sort of calculation based on whether I can carry the loans on my household income if 50% of properties were empty for X months if portfolio LVR exceeds X% might be prudent...

 

Depending upon structures and personal liability 0% or less - then it is more a question for the bankers as to how much they are willing to risk.

 

60-70% LVR is comfortable for me!

not being rich, have to do 90% then bring it down to 60-70% by adding value to prop is been working well for me.

 

I like to have 3 to 6 months living expenses in the bank, which is easier to do now than when I started.
I don't pay any attention to the LVR of my portfolio, its irrelevant what the LVR is, if I cant pay the mortgage the lenders can foreclose.
Its also difficult to estimate. Is it my best guess of current value, the value on the rates notices, last bank valuation or purchase price?

I don't have any multiple for incomes, rent coverage etc. When I do my numbers I assume 80% of gross rent p/a including vacancies, which is probably on the high side of the actual net rent.
My guns cooled a little when I got married and had kids, I guess I had less to lose when I was single. Having dependents cools the lenders calculators as well...

 

The most I can get that fits my strategies and goals and is in line with my risk tolerance for that particular purchase. Unfortunately when it comes to developments, you have to put in a large chunk anyway.

 

Banks will lend because they shift the liability to someone else, its the tax payers who ends up paying the bill when SHTF.

Current tightening is not because banks have suddenly become the guardian angels of financial stability.

 

More then LVR its the serviceability that matters in residential investment, as there are no margin calls as long as one keeps repaying.

One can get repossessed even on 10% LVR if they are not able to service the mortgage.

 

Depends on age, economic conditions and stage of life. Our current LVR is well under 35 % and this excludes our PPOR and SMSF holdings being counted as net equity, so really the LVR position is much, much lower.

When I started out in my early 20's I was very aggressive and accumulated what became the mainstay of the portfolio's capital growth assets. Over the years this was pared back as we repaid some investment debt and then borrowed later for future acquisitions. We have sold down three last year and are looking for different assets now and even different investment classes. We are now more interested in income over potential capital growth.

With Sydney and Melbourne having run so hard, IMO now is not the time to push the LVR envelope on new acquisitions, unless topping up offset(s) through re-vals to be prepared for opportunities as they may arise in the years ahead.

 

If you read the full post and got this impression than

 

@TheSackedWiggle I'm curious to know what's your investment approach/philosophy if you don't mind sharing.

thanks.

 

Currently 80% to avoid LMI but my next purchase will be a PPOR so I’m prepared to use Westpac and go 85% with their no LMI offer (hopefully they extend this offer past September and some other lenders make PPOR more competitive). I can’t envisage myself owning 10+ properties either due to serviceability constraints and I also wouldn’t want to put all my eggs in one basket.

 

But there are many different property baskets

 

Is that a polite way of asking me to shut up?

I think Real estate provides an average joe like me to play the leverage game without margin call (as long as one has ability to repay) and access to cheapest credit compared to any other asset.

But leverage has a time and place.