All Topics / Help Needed! / What LVR do you use for IPs?

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  • Profile photo of santhsanth
    Member
    @santh
    Join Date: 2012
    Post Count: 21
    August 28, 2012 - 6:03 am

    Does varying LVRs change the amount of risk when investing? what is the common LVR used for IPs? 90% 80% or less?

    I would love to hear from those in the game.

    Cheers

    Profile photo of CatalystCatalyst
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    @catalyst
    Join Date: 2008
    Post Count: 1,404
    August 28, 2012 - 7:23 am

    There is no common LVR. It depends on your risk profile. Some people view having a high LVR as more risky. In a way it is. If there is a downshift in prices the bank may want some money back (as your LVR will then be too high). It always pays to have a cash buffer.

    I borrow 105% on each new property but my overall LVR is around 50%. 

    If you are at the beginning of your portfolio building you generally have a higher LVR. As time goes on your LVR reduces as CG rises (if you stop buying that is).

    Profile photo of DerekDerek
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    @derek
    Join Date: 2004
    Post Count: 3,544
    August 28, 2012 - 7:27 am
    Catalyst wrote:
    I borrow 105% on each new property but my overall LVR is around 50%. .

    This is the really important part – high LVRs on individual properties but keep overall LVR lowish. What is correct is dependent upon a whole raft of factors, not the least of which is your personal situation and aversion (or not) to risk.

    Profile photo of TheFinanceShopTheFinanceShop
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    @thefinanceshop
    Join Date: 2012
    Post Count: 1,271
    August 28, 2012 - 7:41 am

    Everyone's situation is different. I personally try at contribute as least amount of deposit as possible but I try to stay at the 89% LVR mark because after 90% the LMI premium increases significantly. Having said that, I have previously found 2 properties at absolute bargain prices when I didn't have too much deposit so I went for a 95% LVR lend. Remember that LMI is tax deductible. 

    You need to have a IP strategy for the future and make sure that you have the adequate funds/deposit for future IP purchases.

    Regards

    Shahin

    TheFinanceShop | Elite Property Finance
    http://www.elitepropertyfinance.com
    Email Me | Phone Me

    Residential and Commercial Brokerage

    Profile photo of Jamie MooreJamie Moore
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    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    August 28, 2012 - 7:50 am

    Personally, I don't have an issue with high LVR's and believe they can work well for those with the appropriate risk profile and age on their side.

    Likewise, I don't have an issue with LMI and see it as a cost of doing business. Without leveraging LMI earlier on, I wouldn't have been able to build my portfolio.

    Here's an article that I wrote for API magazine that talks about leveraging LMI in order to get ahead.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of bardonbardon
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    @bardon
    Join Date: 2004
    Post Count: 557
    August 28, 2012 - 9:28 am

    I go for 105% made up of 80% on the property and 25% from LOC.  My objective is to maximize my deductible debt and my cash offsets against and minimise my non-deductible debt. Like the other poster my overall LVR is less than 105% more like 80% but that will reduce when  I settle on a property that I am currently selling and have a contract on.

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