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Updated almost 5 years ago on . Most recent reply

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Evan Polaski
#2 Multi-Family and Apartment Investing Contributor
  • Cincinnati, OH
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What is Low Leverage to you?

Evan Polaski
#2 Multi-Family and Apartment Investing Contributor
  • Cincinnati, OH
Posted

I was thinking about my personal portfolio and the amount of debt I have.  I know most people will think I am under leveraged, but I like the freedom and flexibility this provides me.

But it got me thinking: What is low leverage to you?  If someone said, I prefer low leverage investments, what does that mean to you?

EDIT: I am thinking specifically for investment properties (non-owner occupied real estate), passive investment or direct.

  • Evan Polaski
  • [email protected]
  • 513-638-9799
  • Most Popular Reply

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    Todd Dexheimer#2 Multi-Family and Apartment Investing Contributor
    • Rental Property Investor
    • St. Paul, MN
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    Todd Dexheimer#2 Multi-Family and Apartment Investing Contributor
    • Rental Property Investor
    • St. Paul, MN
    Replied

    I think leverage as a percentage of value when talking about investment properties is misleading. What is riskier? 

    1. Buying an apartment at $2mm at the bottom of the market with 80%LTV and a 2.0 DSCR

    2. Buying an apartment at $5mm at the top of the market with 60% LTV and a 1.25 DSCR

    In my opinion debt service coverage ratio (DSCR) is the much more important overall to be looking at. I like to see my properties at a minimum of a 1.5 DSCR.

    Most of my properties are leveraged at 50% or less LTV because of that.

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