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Updated almost 5 years ago on . Most recent reply
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- Cincinnati, OH
- 3,437
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What is Low Leverage to you?
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.
Most Popular Reply
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- Rental Property Investor
- St. Paul, MN
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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.