Comfort Zone

[Liverpool St]

Hi there,

I am wondering what people's comfort zone is in relation to their LVR. I mean as the portfolio grows along with the LVR is there a point where it all becomes untenable. For example, how do people feel having a $12M portfolio with a LVR of 50 percent, that is $6M in borrowings even with a "secure" job. As the portfolio grows do people lower their LVR by not purchasing any more? I suppose I am asking is when do you stop?

LE

 

[Scott No Mates]

A permanent job isn't going to cut it with that much debt - you need to look at risk. Is the $12m over 1 property or over 50 properties? If it is one property, the place is vacant there would be a problem, whereas on 50 properties running a 10% vacancy rate ie you would still have income from 45 properties to cover your costs.

 

[Liverpool St]

Thanks Scott,

I suppose there are other variables as well. I suppose it is all relative to your risk. If you start off borrowing against your PPOR and your LVR is 80 percent then that is probably more "scary" then having a $12M portfolio with 50 percent LVR.

LE

 

[nhg]

After running the numbers for the hundredth time.

I had to get comfortable in realising my job had very little to do with covering my investment costs.

After say the 2-3 house, your portfolio has to be able to cover its own ***.

If you can't break away from the 'need work' mindset it is hard to push through to the next level. It was my old (and still somewhat current) mindset and it has been at an early stage for most investors I know.

 

[Liverpool St]

After running the numbers for the hundredth time.

If you can't break away from the 'need work' mindset it is hard to push through to the next level. .

Thanks. Just back to my original question and what level of discomfort do people stop at?

LE

 

[nhg]

Thanks. Just back to my original question and what level of discomfort do people stop at?

LE

Depends on the person. Risk levels, dreams and ambitions, age, lots of factors determine that.

Even on this forum, there are worlds apart between even the 'successful' investors, both financially and as far as expectations go.

I'm on ~80% LVR atm, but would be pretty comfortable at 90%.
Would expect my portfolio to be at 0% expense to me, either by paying it down or higher rents. If it was a development site I wouldn't mind being negative geared, but the profit margin would have to be min 20% in under 2 years.

Over total costs my investments are at 7.7% ROI.
At current LVR it is 9.9% ROI.

 

[Jess Peletier]

The answer will vary depending on age, goals, strategy etc.

Personally if I was 35 with $12M in assets and 50% LVR I would not be stopping here. However if I was 60, I probably would be.

It's very much a how long is a piece of string question.

 

[Richard Feynman]

I'm under 80% now. I would happily be much higher if serviceability allowed.

 

[Liverpool St]

The answer will vary depending on age, goals, strategy etc.

Personally if I was 35 with $12M in assets and 50% LVR I would not be stopping here. However if I was 60, I probably would be.

It's very much a how long is a piece of string question.

Hi Jess,

I guess you are right. However, there is 60 and there is 60. I am 63 coming up to 64 and most days do a 5 Km run. I came back into the workforce here in Sydney after travelling overseas for a couple of years. "They" say that baby boomers don't retire just re-focus. The reason I originally asked the question about LVR and the comfort level was that I am contemplating taking a leap to another level

Thanks

 

[Liverpool St]

I'm under 80% now. I would happily be much higher if serviceability allowed.

Thanks Richard,

Are you buying in Sydney? I settled on a unit in New Farm last month and one settles at the end of this month in East Bris.

LE

 

[Richard Feynman]

Thanks Richard,

Are you buying in Sydney? I settled on a unit in New Farm last month and one settles at the end of this month in East Bris.

LE

Unlikely. I'm holding > $1.5m there now. My next few buys will probably be high-yielders around Bris so I can maintain buying momentum as I'm approaching a serviceability wall.

 

[Ace in the Hole]

I'd probably be comfortable with 10mil debt on 12 mil assets.
Feel like a short break for a while and going to drop down to 20-30% in the next year to consolidate and enjoy some cash flow.

 

[Jess Peletier]

Hi Jess,

I guess you are right. However, there is 60 and there is 60. I am 63 coming up to 64 and most days do a 5 Km run. I came back into the workforce here in Sydney after travelling overseas for a couple of years. "They" say that baby boomers don't retire just re-focus. The reason I originally asked the question about LVR and the comfort level was that I am contemplating taking a leap to another level

Thanks

Absolutely do it- the key to what I wrote above is the 'I', not the 60
Everyone is completely different and it depends entirely on the person in question.

 

[Charlotte30]

Hi there,

As the portfolio grows do people lower their LVR by not purchasing any more? I suppose I am asking is when do you stop?

LE

Dear Liverpool
I am a similar age to you. As my portfolio grows I will use the equity to purchase more but keep the LVR at the same low level. That is my comfort zone. I have a 1, 5 and 10 year plan going forward. I will stop when I don't enjoy property anymore.

Cheers
Charlotte30

 

[Liverpool St]

Dear Liverpool
I am a similar age to you. As my portfolio grows I will use the equity to purchase more but keep the LVR at the same low level. That is my comfort zone. I have a 1, 5 and 10 year plan going forward. I will stop when I don't enjoy property anymore.

Cheers
Charlotte30

Hi Charlotte,

May I ask what your low level LVR is? Also, are you buying in NZ only?

LE

 

[Charlotte30]

My debt is 25% of my portfolio. All located in Christchurch NZ. Townhouses and small block apartments. It will rise to 35% when current project is finished.
Cheers
Charlotte30

 

[Rolf Latham]

comfort zone is the death zone...............


of your larger dreams and expectations

ta
rolf

 

[spludgey]

If I had $12M of property and an LVR of 50%, why on earth would I need a secure job?

For the time being, I have my own somewhat selfish goals of getting cashflow for myself so that I don't have to work.
What will I do once I've gotten there? I don't know to be honest. I'd probably like to do something worthwhile though, rather than just getting really wealthy.

 

[MTR]

Hi there,

I am wondering what people's comfort zone is in relation to their LVR. I mean as the portfolio grows along with the LVR is there a point where it all becomes untenable. For example, how do people feel having a $12M portfolio with a LVR of 50 percent, that is $6M in borrowings even with a "secure" job. As the portfolio grows do people lower their LVR by not purchasing any more? I suppose I am asking is when do you stop?

LE

If you have $12m lvr 50% , $6m equity you do not need a day job, it takes skill to achieve this.... Day job wont cut it anymore cos you can do way better .. Noice

 

[LeoT]

comfort zone is the death zone...............


of your larger dreams and expectations

ta
rolf

Rolf your a champ mate. I am with you on that re comfort zone.

Leo