What's a safe amount of leverage and reserves?

[Noah McPherson]

Hey BP, 

I have two questions I think would be important for me, as a real estate newb, to have a better understanding of. First, at what point would you consider a person Overleveraged? would you judge if a person is overleveraged by their income their bringing in and/or how much liquid assets they have in banks, mutual funds, etc.? Secondly, I would like to know how much I should keep in reserves? For example, I have a duplex. How do I calculate the amount of reserves I need? I understand the answer is probably subjective, but I think this is an important topic, as it keeps your portfolio in a safe position.

[Jay Hinrichs]

To me over leveraged means you have big car notes  your CC are close to or are maxed out and your only making minimum payments you go buy furniture and you finance it.. you buy real estate with the least amount possible down at market prices.

And your cash reserves would only last you a few months to service all the debt.

So no retail debt pay cash for anything you consume or use  OTHER Than a vehicle

and decent amount of TRUE equity in your real estate no FO equity IE refi appraisal but you know the home would never ever sell for that on the open market.

bascially follow Dave Ramsy and

@Steve Vaughan  over the years on BP has written some really good comments on how to build an empire while balancing family life and fiscal safety..   My self i blew it in my 20s like so many do and did..  had fun but financially speaking was not the greatest use of my purchasing power vis a vi my income in those days.  But one thing I did and continued to do over the years was to make sure I owned a home on the SF peninsula Massive tax free appreciation can make up for some boneheaded 20s financial decisions  LOL