What Do You Consider Highly Leveraged?

[Bryan Hancock]

People seem to be wary of investors being highly leveraged. This is for good reason and I agree that everything is fine in moderation.

At what point do you consider someone to be highly leveraged? What measurements do you feel are appropriate for deciding whether or not leverage is too frothy?

[Ryan Pyle]

For me leverage is about both cash flow and LTV. On the cash flow side you need to be able to cover deferred maintenance, rent turnovers, vacancies, etc AND pay yourself.

On the LTV side you need to have enough room to sell fairly quickly, and cover the costs of that sale, for emergencies or if you need to raise cash for better opportunities.

Also, it's not always the LTV. I have a buddy who is going under not because his LTV is too high, but because he was too aggressive with his loan terms. He put them all on 10 year amms which made his cash flow non-existent.