Warning Signs You’re Over‑Geared (And How To De‑Risk)

Key Takeaway

This article explains how to tell if an Australian property portfolio is over‑geared and how to de‑risk without panic selling. Key signs include thin cash buffers, portfolio LVRs above 80–85%, and cashflow turning negative with a 3% interest rate rise, aligning with APRA’s common serviceability buffer. It outlines practical steps to reduce risk, like rebuilding buffers, restructuring loans and selectively deleveraging, with an emphasis on acting before forced sales become necessary.

You’re probably over‑geared if a 3% rate rise, a vacancy, or a big repair would quickly push you into arrears, eating through your buffer in months, not years. Over‑gearing is less about one big loan and more about fragile cashflow, thin buffers and high LVRs across the portfolio.

Here’s how to spot it this week and de‑risk without blowing up your long‑term plan.

Illustration of a geared property portfolio with LVR risk gauge. High portfolio‑level LVRs and thin buffers are key signs of over‑gearing.

1. Red flags you’re over‑geared right now

a) Your buffers are measured in weeks, not months

Add up home and investment loan repayments, plus rates, insurance and basic living costs.

If you lost your main income tomorrow, how long would your cash + offsets last?

Red flag: less than 3 months of total repayments, especially if you own two or more properties. A more resilient target is 6–12 months of full holding costs in cash or offset.

b) Your portfolio LVR is quietly creeping above 80–85%

Work out total loans ÷ total property value.

Example: $2.5m portfolio, $2.1m in loans → LVR = 84%.

Red flags:

Above ~85% across the portfolio; and/or
Multiple individual properties above 90%, especially if cross‑collateralised.

High LVRs plus rising rates and weaker tax benefits after the 2027 reforms is a rough combination.

c) Stress test: a 3% rate rise breaks your cashflow

APRA expects banks to test new loans at least 3% above the actual rate.

Do the same at portfolio level:

Take your current average rate (say 6%).
Model 9% on all loans.
Keep rents flat and assume no negative gearing benefit.

If you’d go negative by more than you can comfortably cover for 2–3 years, that’s a clear warning. For a worked method, see How to stress-test a geared property portfolio in one evening.

d) You’re living off tax refunds or refinance cashbacks

If your plan is “the tax refund will fix it” or “I’ll just refinance again next year”, you’re already relying on outside rescue.

With negative gearing benefits being restricted for many established properties from 1 July 2027, assuming tax will bail out your cashflow is risky.

e) You feel trapped

Common emotional signs:

Sleepless nights about rates or vacancies.
Avoiding looking at statements.
Feeling you “can’t” sell anything because of tax or ego.

Feeling boxed in is usually a symptom of over‑gearing and poor structure, not just mindset.

2. De‑risk gently: what you can do this month

You don’t have to panic sell. Start by stabilising cashflow and buffers, then look at structural fixes. ### a) Rebuild buffers first Aim for a minimum 3 months of total repayments, pushing towards 6–12 months over time. Practical moves: - Temporarily redirect surplus cash to offset instead of extra repayments. - Park bonuses or business distributions into your highest‑risk loan’s offset. - Trim non‑essential spending until you hit a buffer milestone (e.g. 3 months). On a $2m total debt at 6% P&I over 25 years, repayments are roughly $12,900 per…

Frequently asked questions

How high is “too high” for property LVR?▾

There’s no universal cut‑off, but for a multi‑property portfolio many investors aim to keep overall LVR under roughly 70–75% and individual properties under 80%. Once you are above 85–90%, especially across several properties, you become much more exposed to rate rises, valuation drops and policy changes, so buffers and cashflow resilience need to be very strong.

Should I fix my rates if I’m worried I’m over‑geared?▾

Fixing can reduce payment volatility for a period, which helps planning, but it does not change the fundamental leverage. If you are over‑geared, use any fixed‑rate window to build buffers, clean up loan structures and consider de‑gearing options rather than treating fixed rates as a permanent solution.

Is it always bad to borrow against my home for investment?▾

No. Using home equity can be reasonable if overall LVRs stay conservative, repayments remain affordable under a 3% rate rise, and you keep solid cash buffers. Problems usually arise when investors chase maximum borrowing, cross‑collateralise multiple properties and assume future tax benefits or price growth will rescue weak cashflow.

Speak with a specialist advisor

Confidential consultation, bespoke advice for your situation.

Warning Signs Your Property Portfolio Is Over‑Geared (And How To Fix It)