澳洲Australia property LVR as % of you portfolio | Sydney


在澳大利亚 I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo


I have been talking to a few SSers and most have reasonable portfolios....but what surprised me was that a lot of them have very high LVRs.

As our discussion progressed....some of these people have had their portfolios for a few years but their LVRs are quite high. I believe this is not good as this indicates that CG is not happening with their protfolio.

For those who don't know what LVR is ...it means loan to valuation ratio. For example if you have a $1m portfolio....and have 400k on borrowings you have a 40% LVR.

Would love to hear what people think and how they are progressing with their porfolios.

For the record mine is a $3-5m portfolio but have an LVR of less than 35%.  

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sash said: ↑
As our discussion progressed....some of these people have had their portfolios for a few years but their LVRs are quite high. I believe this is not good as this indicates that CG is not happening with their protfolio.Click to expand...
It could also indicate that they are growing their portfolio, using the CG. I like my LVR to max out at around 65-70%. When it dips below that, I'll release equity and look for opportunities. This, in turn, brings the LVR up again.

Maintaining a relatively high LVR is part of my risk mitigation strategy, which is why I don't allow it to go below those levels.  

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Good point Rob....one person said the same thing he likes his LVR to max at 60-70% as this leaves him with enough of buffer but also allows for LOE for afftional purchases. He is on a major acquisition stage so this works well for him.

Agree about the Risk strategy...

Rob Williams said: ↑
It could also indicate that they are growing their portfolio, using the CG. I like my LVR to max out at around 65-70%. When it dips below that, I'll release equity and look for opportunities. This, in turn, brings the LVR up again.

Maintaining a relatively high LVR is part of my risk mitigation strategy, which is why I don't allow it to go below those levels.Click to expand...
 

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As of Dec 2009 my LVR was 80%: As of Dec 2010 maybe its 75%

1 PPOR (Perth)
1 IP (Perth)

I will have to go to 90% LVR when I buy in 2012 and for the next few ips I buy. I cant see my LVR dropping below 80% for a while! Once I have 3 or 4 and CG starts to happen then maybe my LVR wont be so high!

It all depends what stage your at! Someone like me who started off with very little equity will be having a high LVR for quite some time to come! If however you happened to own your PPOR outright and started investing in Perth before the boom of 2006 then things would be different.  

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<1m 55% LVR.

I too don't like it up around the 80-90% mark.

Currently keeping an eye out though for the next opportunity to purchase, but only if its a steal.  

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Rob Williams said: ↑
Maintaining a relatively high LVR is part of my risk mitigation strategy, which is why I don't allow it to go below those levels.Click to expand...

How is having a high LVR part of a risk mitigation strategy? I must be missing something.


See ya's.  

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topcropper said: ↑
How is having a high LVR part of a risk mitigation strategy? I must be missing something.Click to expand...
You're not missing anything. We all follow our own path and on my path, it's a risk mitigation strategy.

My assets are in my own name. I don't feel the need make lawyers and accountants rich by setting up trusts and corporate structures.

In the event that someone wants to sue me, they have to also deal with the banks, who hold the greatest interest in my properties. Any decent lawyer will advise their client that by the time they force me to sell, after paying out the mortgage, triggering a CG liability etc, there will be little left to pay damages for their frivolous law suit.

Meanwhile, I get to enjoy the huge tax benefits of a negatively geared portfolio.

It's not a strategy for everyone, but it's suits me. For now.  

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topcropper said: ↑
How is having a high LVR part of a risk mitigation strategy? I must be missing something.


See ya's.Click to expand...
Hi TC

Always more than one way to look at things ........


Comparing med high LVR to High LVR as an eg

90 % lend on a mill with 900 k loan and 90 k in the offset account is to my mind a lower risk than an 80 % lend on a mill with zero buffer.

As an aside

Im still amazed at the number of folks that try to minimise or avoid LMI altogether and wont have 2 bob to rub together after the purchase in case of challenge or opportunity.

Pretty much the same thinking is why many small start up businesses end up in trouble early because they dont have suff operating capital

ta
rolf  

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55% on a greater then $5million personal holdings.  

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Rolf 100% agree.

People limit their growth with their small thinking.  

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Yep...spot on...people forget to litigate nowadays lawyers will want the prospect of winning to be very high. Aditionally, if a bank holds a mortgage on your property....the ambulance chasers will not know if you owe 90% or just 10%.!

Rob Williams said: ↑
You're not missing anything. We all follow our own path and on my path, it's a risk mitigation strategy.

My assets are in my own name. I don't feel the need make lawyers and accountants rich by setting up trusts and corporate structures.

In the event that someone wants to sue me, they have to also deal with the banks, who hold the greatest interest in my properties. Any decent lawyer will advise their client that by the time they force me to sell, after paying out the mortgage, triggering a CG liability etc, there will be little left to pay damages for their frivolous law suit.

Meanwhile, I get to enjoy the huge tax benefits of a negatively geared portfolio.

It's not a strategy for everyone, but it's suits me. For now.Click to expand...

Agree here also...I have always chosen to pay LMI and maximise the amount I have in offsets. Cash is truly king!;)

Besides....after tax you only end up paying a portion of LMI as it is tax deductible. I also capitalise it onto the loan.
Rolf Latham said: ↑
Hi TC

Always more than one way to look at things ........


Comparing med high LVR to High LVR as an eg

90 % lend on a mill with 900 k loan and 90 k in the offset account is to my mind a lower risk than an 80 % lend on a mill with zero buffer.

As an aside

Im still amazed at the number of folks that try to minimise or avoid LMI altogether and wont have 2 bob to rub together after the purchase in case of challenge or opportunity.

Pretty much the same thinking is why many small start up businesses end up in trouble early because they dont have suff operating capital

ta
rolfClick to expand...
 

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Nathan said: ↑
Rolf 100% agree.

People limit their growth with their small thinking.Click to expand...
Hi Nathan

I like to think of it as " we dont know, what we dont know"

The challenge that many of us have ( even those of us that are "open-minmded") is that we dont see that this important aspect.

I have found that sitting down with a group and having a chat about what you are trying to achieve, releases some interesting thoughts and ideas.

ta
rolf  

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I don't go above 80% LVR, a few months ago bought third property and bumped it back up to 77%. With cash set aside and this margin, I feel very comfortable with my decisions.  

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We're between houses so about 20% LVR.

Hoping to sell in the new year and get debt free for a while and build up some savings, that'll be nice. If the house doesn't sell quickly we'll be back up to about 35% LVR.

Selling is looking most tempting as we have a 10yo small car and would like a bigger newer one, and yes, I'd happily sell a house to get a nice car.  

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sash said: ↑
Yep...spot on...people forget to litigate nowadays lawyers will want the prospect of winning to be very high. Aditionally, if a bank holds a mortgage on your property....the ambulance chasers will not know if you owe 90% or just 10%.!Click to expand...
I can understand someone in a high risk profession (eg, medical), or someone who is a dodgy tradie, worrying about litigation, and so having a higher LVR, but it seems crazy to have a high LVR as a risk mitigation against the chance of being sued. I would be more worried about the risk of having to sell up if something goes wrong on higher LVR, or when the market falls, and your in negative equity.
Again, different strategies. The tortoise eventually beats the hare, with less stress in investing, less sleepless nights worrying about high LVR's, more time enjoying life and traveling at the same time :)

We're $1m to $2m portfolio, LVR less than 35% (28.9%) in 7yrs. But holding now till late 2012, as that LVR could get bumped up 2011/2012 with a falling market.
There should be a time factor in the poll, as anyone in the game for 10-15yrs, would really have had huge capital gains from a huge market boom.  

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I am at 31% LVR......

Don't think that people are saying a high LVR is a form of protection. All that is being said is that have loans on most of your properties.

This is because privacy laws prevent lawyers from accessing how much equity you have on your home. They don't know if you owe 50k or 900k on a $1m home.


bluestorm said: ↑
I can understand someone in a high risk profession (eg, medical), or someone who is a dodgy tradie, worrying about litigation, and so having a higher LVR, but it seems crazy to have a high LVR as a risk mitigation against the chance of being sued. I would be more worried about the risk of having to sell up if something goes wrong on higher LVR, or when the market falls, and your in negative equity.
Again, different strategies. The tortoise eventually beats the hare, with less stress in investing, less sleepless nights worrying about high LVR's, more time enjoying life and traveling at the same time :)

We're $1m to $2m portfolio, LVR less than 35% (28.9%) in 7yrs. But holding now till late 2012, as that LVR could get bumped up 2011/2012 with a falling market.
There should be a time factor in the poll, as anyone in the game for 10-15yrs, would really have had huge capital gains from a huge market boom.Click to expand...
 

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Rolf Latham said: ↑
90 % lend on a mill with 900 k loan and 90 k in the offset account is to my mind a lower risk than an 80 % lend on a mill with zero buffer.Click to expand...
I understand and agree with what you are saying, but in the context of this thread, I would count both as 80% LVR (with one have 90% LVR available).

Thus the risk minimisation strategy is to have a buffer between your current LVR and you maximum readily available LVR.  

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Currently about 39% LVR but looking to purchase again in a few months.  

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Currently at around 48% for two IPs

Planning to purchase IP 3 in the next 3-6 months which will push it to around 66-70%

Not deliberately conservative, just slow portfolio growth due to the difficulty in obtaining finance and (to be honest) inertia which I'm overcoming.  

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I own my ppor and 1 IP at the moment (with a deposit on another one which should be ready at the end of next year). They're worth about $1.1M and we owe $780,000 all up. So sitting around the 70% lvr at the moment.  

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