How much debt do you have?

I get that question alot from colleagues who know we invest "how do you sleep with all that debt?"

It's funny you should say that. Years ago, when the portfolio was much smaller, I was having a conversation with a friend, trying to encourage him to buy his first home. He knew we invested, and he said exactly that, "how do you sleep with all that debt?" He couldn't look past the debt to see the benefit, even to owning a PPOR, and at the time it would have cost less than the rent he was paying.

Fast forward......Hubby had to get stem cell treatment on his knee. It's not covered by Medicare. My friend asked how much it cost. It was $14k, cash upfront! His reaction was "OMG! If that was me, I'd still be waiting, I don't have access to that sort of cash".

This made me think of how easy it was to write a cheque. Sure I'd have liked to not have to pay for this, but the point is, that if he wanted that treatment, we had to pay for it, and it was as easy as buying the groceries.

This freedom to be able to do that has come from all the debt (good debt, mind you) on our portfolio. Debt that increases all the time (extra purchases) but the asset base is constantly growing, and spitting out some lovely CG as well as positive cashflow.

How much debt do I have? Not enough! Looking for more all the time. :D
 
"OMG! If that was me, I'd still be waiting, I don't have access to that sort of cash".

This made me think of how easy it was to write a cheque. Sure I'd have liked to not have to pay for this, but the point is, that if he wanted that treatment, we had to pay for it, and it was as easy as buying the groceries.

This freedom to be able to do that has come from all the debt (good debt, mind you) on our portfolio. Debt that increases all the time (extra purchases) but the asset base is constantly growing, and spitting out some lovely CG as well as positive cashflow.

How much debt do I have? Not enough! Looking for more all the time. :D

Agreed. We recently had a medical emergency while traveling. While the emergency was stressful enough, it was very comfortable being able to say "what ever it takes" without any consideration of what the $$ was.
Sure, it would be better to not have to spend the $$, but it sure was nice knowing that cost was never a consideration.

While I consider debt a risk, it can be mitigated. It is a greater risk to not have any.

Blacky
 
Very true Skater. Similar story, my fiancee has some very serious back problems as a result of a car accident a few years ago (she only discovered the problem recently) and while Australia has the technology to treat it (osteopathy), it's very new to this country and with the relative inexperience of doctors here would probably do her more damage than good. The only good places to treat it are Taiwan or America, and it requires 1-2 months (air fares, hotels, treatment cost etc).

I just gave her $40k to do this. I could've done this even if I never invested, or could've asked my parents or she could've asked her parents. But knowing that this is all funded by "spare money" from property cashflows just makes it that much easier.
 
Currently sitting on around 590k debt with 90% LVR for 3 IPs (no LMI being a bank staff :p ).

I was so close to increase this to 800k but the seller took a slightly higher offer so i'm back on the market looking again.

Rental vs Loan repayment is roughly $41k rental a year (im being optimistic here by multiplying the rent by 52 weeks :eek: ) vs $28k repayment a year (Interest only).

But don't get too exciting yet, as management fees and council fees eat away majority of that green colour numbers........... :(
 
You need to look at more than just the amount of debt. As others mentioned, it's relative to you assets.
Some people are comfortable with a high LVR, others not. Find a % your happy with, balamce that with your cashflow and go from there.

People at work say the same thing to me " how do you sleep with all that debt" and "what will happen if you lose your job?"

Answer:- "Nothing, my portfolio is CF+ so if I lost my job the loans would continue to be paid" :D

I counter with "what will happen if YOU lose your job?". Some would be on the street.

It's all relative.
 
And how do you not think about it all the time.

I currently have about 500k debt and 3 IPS

Want to invest more and have been told by bank I can borrow up to 300k more but am not sure if I want to get into that much debt.

Of course if you can service the debt it doesn't matter but not sure...

Ha! I have <$10k dirty-debt and no assets or IPs and I think about it ALL the time... really looking forward to being able to say that I actually have a decent amount of good-debt with something to show for it.
 
Just under 8, with some of that offset from PPOR offset acc funds.
All IP's create cash after deductions, so feel quite comfortable at this level.
 
Very true Skater. Similar story, my fiancee has some very serious back problems as a result of a car accident a few years ago (she only discovered the problem recently) and while Australia has the technology to treat it (osteopathy), it's very new to this country and with the relative inexperience of doctors here would probably do her more damage than good. The only good places to treat it are Taiwan or America, and it requires 1-2 months (air fares, hotels, treatment cost etc).

I just gave her $40k to do this. I could've done this even if I never invested, or could've asked my parents or she could've asked her parents. But knowing that this is all funded by "spare money" from property cashflows just makes it that much easier.

there is very famous acupuncturist in carlton. Lots of people travel from across asia just to see him. Maybe worthwhile for pain relief.
 
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