I remember well buying a commercial property in 1990, with base rates @ 11.5% and the banks margin on top. Our business was highly cash positive and we had no issues in funding the project over the following years.

Having moved in to buy to let I ask the following question related to long terms capital repayment and the degearing of rental income.

Most buy to let lenders a looking at stress tested rental levels which are indicative of a LTV in the 58-60% range unless the borrower has additional income to reduce the interests rate risk.
I appreciate the general long term model looks at holding the acquisition at or close to a refinanced level of debt over the long term and allowing inflation and general price level increases to reduce the level of gearing hence to improve the rental cover and free cash. Accepting the model looks to work over time the option of debt reduction over time is under all situations to be done from after taxed income at the personal or corporate levels. Is there an arguement of assessing the gearing as an absolute level at acquisition or one to be aggressively attacked as a means of a general reduction in the gearing aspect of rental or the overall revenue and capital returns generated over time?

If interest rates continue at the current level over a longer term and the stress test remain on lending will the level of capital growth follow the market value of buy to let property? conversly the agrument follows the optimised return is the rate of debt covered by the rental after costs ie free rental cash flow. If the portfolio returns from the collective investment enable a postive cssh postion to be generated the optimised rate will reflect after taxed cash flows and a long run reduction in the gearing levels to a rate which matches the post stress tested interest rate determined by the long term lender. This assumes there is a long term debt or gearing element in the portfolio.

I have assessed post tax returns to match the opportunity cost of funds assuming the portfolio is in an expansionary model as the alternative is to sell assets and reduce the overall debt in the collective model hence improving the post tax return overall. In the case where after taxed income from other sources is used to repay long term funding, this should be priced as at a cost at least equal to the long term funding costs. This is a form of double accounting but necessary to assess the actual benifit of repaying debt in order to free the future cash flow.