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Increased LVR

Discussion in 'Investing Strategies' started by rambada, 17th Jul, 2006.

  1. rambada

    rambada Well-Known Member

    5th Sep, 2005
    Anyone out there thinking of increasing their property LVR? I have steadfastly kept mine at 80% but am investigating wavering this rule. Reason - if we accept that we are at the bottom or near bottom of the RE market then in the medium term we can expect a capital increase. There are a multitude of opportunities out there, property, funds, CPT's, etc. To jump on the tail and ride it would be extremely benificial. And ride it until the LVR decreases back to 80% but on a higher assett base.
    The same query applies to LVR for funds. Any thoughts?
  2. Nigel Ward

    Nigel Ward Team InvestEd

    10th Jun, 2005
    My view is that with residential property you should gear as much as you possibly can (safely).

    If your cashflow is strong then 95-97% with LMI is the way to go IMHO.

    The amount of leverage you can get against property is one of the huge advantages it has as an asset class compared with shares.

    I should add that what perhaps matters more is your overall gearing level across all your financial assets. If you have roughly the same amount of property and shares/funds then somewhere around 65-75% overall gearing can be achieved with 50% margin loan...

    Just some food for thought.

  3. Simon

    Simon Well-Known Member

    17th Sep, 2005
    Even in a flat or declining market? Might end up with negative equity tho, unlike margin lenders, banks rarely ask for additional funds.

    I think it depends on your choices. I would choose to stay at 80% unless it was impossible - then I would not hesitate to go higher.
  4. Dr Lobster

    Dr Lobster Well-Known Member

    12th Jun, 2006
    sydney nsw
    I'm looking at increasing my lvr to about 87%.

    95% of my portfolio wll be allocated to resi, the balance in managed funds.

    My view probably differs from the banks. I do not believe that lvr is critical at these levels, its my ability to service the debt that counts. Though at 87% I'm not looking at taking on much more. If I did it would be a margin loan at a level that would virtually rule out a margin call ie a low % of what I am allowed to borrow against my managed fund.