How do you calculate leverage on existing portfolio as I have 11 rental properties? Is it cureent debt/total buying price of all properties or is it current debt/current total value of all properties?
I would appreciate any input on this. Also, how much leverage do you consider to be safe in recession/correction etc.?
My lender looks at either an appraisal or a BPO (broker’s price opinion) to represent today’s value. So the ratio between the current debt and the current value is what the use to determine how much leverage we have.
Each person will have different ratios with which that they feel comfortable. There is a cost to refinance, which cannot be ignored, and I aim to have positive cash flow. That said, rents have increased since our last refinance, and now we can pull some cash out while still keeping cash flow.
I get my ratio of pending loan balance to total proposed value of all rental properties to be at 60% leverage. i.e., 60% is still pending loan, and 40% is paid off.
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