Quizz – LVR percentage- R U COMFY?

I’m geared to the eyeballs and my balls are right on the line.

89%

Interest rates not property prices is the immediate danger.

I have most in fixed interest so I have negated most of the risk.

I am young and single and could only fall back to where I recently started if it went nuts. Whatever.

and if the need arose I would get a second and/or third job for cashflow.

I am still confident of basic demographics, immigration, strong Australian Economy, Market demand for properties I have and have always believed in Rich Dads Philosophy.

“Somedays the market is excited and overrates things, on other days the market is negative and underrates things, but if you buy a good value investment with strong underlying figures, then you will come out a winner in the end”

Not his exact words, but you get the drift.

And I know that in 10 -20 years time that my properties are going to be worth a lot more than they are now and potentially bring Financial Freedom much closer.

To me that is worth the risk.

My SANF is fine , and if I lose all, heck I’ll just start again.

Comfort zones need to be broken if you want to progress in life.

I wouldn’t recommend my strategy to anyone that isn’t prepared to fall all the way back to the start.

I am going to pump hard into my debts though, and once reduced I will keep things at a more comfortable level.

It’s the early years that can make a big difference later on

.

Lifexperience

I’m currently sitting on about 66% but have no problems at all being up to 90% or even higher.

I only buy properties that make me money from day one so I figure that I am better off having some of that equity going towards a new property to earn me more money.

Of course I lose sleep but that’s because buying property is stressful, but having such a high LVR doesn’t add to my stres levels.

It’s all a game. If it all goes wrong then my husband and I will just go back to having jobs -exactly what we were doing before we started buying property.

Cheers

K

We’ve kept a graph of our overall LVR for the last 11 years, tracking it every 3 months when the VGO data comes out or when either a large payment has been made or a new acquisition comes onboard.

Initially the graph is very erratic, with the first IP sending it over 90%. With a few payments this comes screaming down really quickly.

After a while the figures start evening out as the numbers get bigger and the magic of compounding takes hold.

It’s to the point now where my entire salary for a year could be dumped into the loans and you wouldn’t be able to notice it on the graph. The only thing that affects it nowadays is the rise (or fall) in property values. It’s been a slow and boring graph to construct, and to tell you the truth it all gets a bit blaise after a while.

My lender has a copy of it, and is slightly comfortable in breaking some of their “fixed rules” about LVR’s and LMI’s. We don’t know exactly where their rubbery limit is anymore, but their specific comment was “they do feel more comfortable extending us another loan rather than writing 20 other loans for people with track records they don’t yet know.”

We’ve also been tracking net worth, nest egg, cashflow, debt and my favourite the equity in each property for the past 11 years.

The vertical axis scale has had to be altered three times to accomodate the changes.

My favourite mental and visual “spur on” is to have a white survey marker on the right hand side of each property. It’s supposed to start at the front of the property when you buy it, and move along as you pay it off, reaching the back fence when it’s fully paid off. Lending 106% sometimes, it’s been on the council verge a few times, but it’s great to stand at the peg and look forward to the front of the block and see “We own this bit”…the daunting bit is turning around and saying “the Bank owns all of that” from where you are to the back fence.

You quickly appreciate that whilst you may think it is ‘yours’, really we are all just property managers and the Banks are the ones that are controlling this show.

Tenants have never noticed or said anything, but I get immense satisfaction when the VGO data comes out, to trundle along and shift the white pegs a step or two back towards the back fence (or in our latest props, bring the peg off the council verge and back actually onto the property) !!!

We sleep fine. Hi LVR’s, lo LVR’s…it all gets a bit ho-hum after a while. We find you generally extend yourself up to your capabilities. If you overextend, the Lenders generally tap you on the shoulder fairly quickly.

Cheers,

Dazzling

“No point having a cake if you can’t eat it.”

Have been as high as 110% currently at 45% …moving to 85% soon.

To be honest I don’t see why it is relevent….debt service ratio is the one that you need to focus on.

Negative equity.
Imagine the situation. For some reason or another, you need to sell one or all of your properties. Because house prices have fallen, you have 2 choices:
a) sell at less than the outstanding loan(s) and spend the next XXX years paying for something you’ve already sold.

b) bankruptcy. This will leave you unable to secure finance for XXX years. Remember that all lending criteria would be tightened up to prevent further bad-debt exposure to the banks/mortgage insurers etc.

Either way, this whold “start again from nothing” business will be delayed for quite some time…

I worry that many folk don’t fully understand how crippling negative equity can be. It makes borrowing money very difficult, even for the little things in life.

Cheers, F.[cowboy2]

Edit (forgot to answer the question!!!)

Current LVR: 0%

Debt free, the way to be. (at the top of the cycle anyway!)

So many “what ifs” ….what if there is no crash , what if you don’t lose your job, what if you don’t haev to sell.

While ever I have the ability to work I can service the loans and all is cool. I would hate to get to 90 years old and realise that I should have borrowed more through out mylife….its not like you get a seceond chance.

I would rather be close to broke a couple of times in my life than poor for all my life !!!!