I'm pretty conservative also with the amount of debt. Most of my friends have a lot more than I do. I'm at about 42.6% LTV portfolio wide. I'm a little over my own personal limit as I want to stay between 30-40% LTV. And yes I do mean I am only 30-40% leveraged, the rest paid off.
My reasoning is partly low risk tolerance, desire to hire out everything and still make good money, and third the desire to get a high net worth with assets that could be borrowed against for larger projects the small 1-4 family rental properties.
Totally agree I'm way underleveraged. Another way I look at it is what is the most cashflow I can have for the least amount of responsibility - aka clogged toilets, roofs, furnaces, air conditioners, etc. As far as actual cashflow dollars go, think of how much more responsibility you have if you had 100 leveraged properties that cashflowed 100 per month versus 10 paid off properties that each cashflowed 1000 per month. Same cashflow, way less risk, management, etc. Ofcourse you get equity paydown, appreciation on your borrowed money, etc, etc with leverage, but that is all meaningless if your business isn't strong enough to make it through the four or five really bad cycles to pay off your 30 year loan.
One other personal requirement I have is that I must pay down 1% of my highest total debt each month. So without getting new loans I will have a paid off portfolio in 100 months. I put the additional required principal paydown into a HELOC so I can reborrow or use in deals like my last example to get even bigger gains.
Last, even in this credit crunch market you can buy at 100% LTV if you really must. You can do anything you can get a seller to do if they will take back a loan. If you can find a motivated enough seller you can even get no interest with nothing down if they agree. I can't stress enough how great getting sellers to take back a loan is. Usually a better interest rate than the banks and no ridiculous closing costs. Here is an example:
Just bought a two family house with $5 k down, 0% interest, $250 per month payment. Second floor is already rented and the is $50 positive cashflow from just that. Paid my attorney $200 to fill out a fill in the blanks note and mortgage. Seller was a tired landlord. Not bad, eh? Will Wells Fargo do that? Now to throw you finance guys a real curve ball, I'm actually considering paying him off early. Sellers unlike Wells Fargo also do one other thing I like, that is take payoff at a discount. At the closing he asked if I would reconsider the terms and give him a cash payoff of about 70 cents on the dollar. So tough choice - no interest or even cheaper house? I think I will keep the loan for a bit then ask him what he will take for a payoff. Can't lose either way.