At what point are you over leveraged?

Question

Out of curiousity from my previous post (https://www.biggerpockets.com/forums/311/topics/34...)

I figured I should ask this. How many properties do you all own fully compared to leverage/finance? Do you believe you can ever over-leverage? Obviously while you're young it is a good thing to do, but I don't think someone who is 65 should have 30 leveraged properties all on their own.

Any thoughts?

Curtis Bidwell · Answer

@Lawrence Moore Why would you discriminate against folks reaching maturity?! The principles of Leverage work equally for the young and old. The bigger question is how much do you have in reserves to cover yourself should you find yourself in a downturn - which leads to another critical question regarding cash flow.  At 50+ I'm fully leveraged on several properties that have wonderful cash flow. I'm not as leveraged on others that don't cash flow as well. I don't intend to ever pay them off, but rather take the cash to live on and the equity do other things with - expand, buy notes, give to charities, etc.

Curtis Bidwell · Answer

@Lawrence Moore Hey, I Was just messin' with you!

In all reality I've never seen 30-50% vacancy in my 26 years of landlording... Even during the '07 recession (but I never owned anything in Detroit!) There's just too many ways to get something occupied before you get that deep in trouble.

If you bought it right and have a solid purchase-to-rent ratio (1%, 2% rule) you should be just fine.  If you use all that money to pay it down you incur a growing opportunity cost for not utilizing that money on something productive.

Lawrence Moore · Answer

@Curtis Bidwell I didn't intend to discriminate, but rather pose the question of at what point would you consider yourself personally to be over-leveraged?

In my scenario I was thinking of someone who has 30 properties all on their own, and if for some reason 30-50% of their occupants vacated then they would be left with a bunch of mortgages they couldn't pay.