Debt ratio for investment properties

Discussion in 'Property Finance and Real Estate Loans' started by John62, May 28, 2019.

  1. John62

    John62 New Member

    Hello guys,

    I am not very experienced when it's about real estate investing. Hence, I have a question to you:
    If you start to invest in real estate, what is the right amount of money I should borrow from the bank. Should I keep my loan as high as possible and the equity as small as possible? I understand that the interest rate is higher if you don't want to pay more than 20% on your own. After listening to Robert Kiyosaki I think that it can be beneficial to have debts. I wouldn't use the properties for me but would rent them so I generate a Cashflow.
    Which debt ratio do you guys have for your investment properties and how many properties you've bought already?
  2. realdeals

    realdeals Active Member

    Used correctly debt is a great way to speed up the investment process but if you over extend your finances then it might all come crashing down at some point. What kind of figure are you starting with? What level of income do you have to support future mortgage applications?
  3. John62

    John62 New Member

    What do you mean with crashing down at one point?
    So far my savings are not huge. I plan to start with 30k, but the longer I wait, the more I could save. Income is in the higher middle-class.
  4. diyhelp

    diyhelp Active Member

    I think when they say crashing down they mean having relatively little equity in your properties which means they are supported by debt. If interest rates rise or you have a few tenent free months this can cause major problems.
  5. John62

    John62 New Member

    Well, this can happen to you regardless of the initial capital. You should always have a certain amount of cash to not run dry during hard times.
  6. Longterminvestor

    Longterminvestor Administrator

    I talk 2 many private landlords who work their figures out using 10 months income a year as opposed to 12. This gives a little headroom and allows investors to err on the side of caution rather than being too optimistic and using 12 months rental income.
  7. John62

    John62 New Member

    That's smart. You never know how long the apartment can be vacant.
  8. FWL

    FWL Member

    As an investor I would also rather err on the side of caution and give myself some headroom in the event of unforeseen issues.

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