# LTV and Rental



## Tadgh2004 (28 Apr 2004)

Hi,
 Interested in hearing from property investors as regards to Loan to Value ratio. Basically wondering what people think is a comfortable percentage loan to have in property to avoid negative equity in their property portfolio. There are a lot of predictions of house prices dropping. What will be the outcome, will it be a lot more difficult to find tenants ??? If interest rates increase I would imagine this will make todays tenants reluctant to jump on the bandwagon and purchase. How do we correct the imbalance and provide affordable housing for young couples..
          Tadgh


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## Brendan Burgess (30 Apr 2004)

The main attraction of property investment over equity investment is the tax treatement of interest on the mortgage.

If you are not borrowing to invest, you should probably invest in equities - higher return, less risk and less hassle, although greater short term volatility. 

If the attraction is borrowing, then you should borrow the maximum. You must be able to tolerate the following risks:
periods of no rental income
Declining rental income
Increased interest rates

It's likely that you will be tolerating these risks from your non-rental income. 

Brendan


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