Paul Glossop, 33, has a wife, a young son and $2.5 million in mortgage debt.

But the prospect of millions of dollars in mortgages owed to the bank doesn’t faze him. In fact, he is planning on adding to his 10 property portfolio in the near future.

Sydney’s investor boom and skyrocketing prices have underpinned the rapid expansion of personal debt.

Household debt has tripled in the past 25 years, much of this is a result of rising house prices – mortgage debt increased to 28 per cent in 2015, compared to 10 per cent in 1990, according to a Bankwest Curtin Economics Centre report in June.

Given investor lending rose to 60 per cent of the Sydney market in July, according to the ABS, it’s likely this indebtedness is even higher.

Average mortgage debt as a proportion of property values has almost tripled over the past 25 years.John Flavell, Mortgage Choice

In October, the Reserve Bank of Australia’s research paper warned borrowers now have less of a safety margin against unexpected financial changes. Rising house prices and investor activity had increased the risk of a market correction, the paper shows.

Yet, not every investor is overly concerned about surging debt levels – Mr Glossop considers it a way to get ahead.

Despite owing the bank a significant sum, if he sold his portfolio today he would walk away with $1.4 million.

Starting out with a $20,000 deposit, with his mum standing guarantor, he bought a two-bedroom apartment in Cronulla – “a place to call our own,” he said.

After a full renovation made them almost $50,000 in equity after a revaluation, he saw an opportunity to repeat the process.

Accessing a $200,000 line of credit connected to his mother’s mortgage, he then went on a calculated buying spree around Sydney, including Mount Druitt and Campbelltown. He also bought a property in the Hunter Valley – a purchase he said had so far been his least successful.

His strategy was to have a maximum 80 per cent LVR, buying under market value with the potential to add value through a renovation or future small development and neutral or slightly positive cash flow.

They used 2013 as a consolidation year, paying the line of credit and loans down.

Then the portfolio began to feel the effect of the Sydney boom, with strong price growth allowing him access to equity. The resulting poor yields in Sydney had him looking to Queensland, using the deposits from the capital gains in the harbour city to buy two properties a year since.

Although the growth in the properties and diligent repayments have ensured he has kept his equity up, he said there was a point a few years ago where he thought “I’m a million dollars in debt”.

” But it’s encumbered by many properties, not one,” he said.

“If it was in my [family home] I wouldn’t do it. In Sydney, a lot of people are in millions of dollars of debt for their home,” he said.

Doing some quick calculations, he said $2.429 million in interest-only mortgage repayments comes to around $125,000 a year with a rental return, before deducting costs, coming to $200,000 per year.

Overall, the portfolio is neutral to slightly positive after costs and tax benefits – which he says helps him minimise his risks and ensure he remains serviceable for further debt.

Now director of buyer’s agency and investment advisory group Pure Property Investment he said explaining this debt to prospective investors is a big part of the process.

Mitigating risks by insuring all his properties for replacement value, including landlord’s insurance, he said they keep a portion of money aside for maintenance and have a solid exit strategy planned.

Mortgage Choice chief executive John Flavell said those faced with significant debt could mitigate the risk in several ways.

“By fixing their home loan, mortgage holders are given some surety around their regular mortgage repayments for a certain period of time,” he said.

Since the major banks’ decision to increase interest rates on their suite of variable home loan products, he had noticed a spike in the level of fixing inquiries.

Warren Gibson general manager of fractional investment fund DomaCom said debt is a problem when it can’t be serviced through income or rent, or a combination.

“If an investor hasn’t got a buffer to cover a period of no tenancy or an increase in rates then they could be in strife,” he warned.

“Investors approaching retirement would be wise to pay down debt before they retire so they are not under too much pressure should a tenancy issue arise or they have to divert funds for other purposes such as health management,” he said.

He recommended diversifying against market downturns by considering a range of investment assets.

“Property is not a liquid investment so it is prudent to have your investment portfolio diversified to some degree at all times. Some money in cash, fixed interest and equities can provide liquidity,” he said.

Tips for managing property debt

Evaluate a budget and living expenses prior to taking on a mortgage

Be honest and transparent with your broker

Disclose all debt and be realistic about expenses

Consider mortgage features for your needs

Review your loans regularly with a yearly “health check”

Consider insurances to protect you from the unexpected

Fix your loans if you want more certainty about home loan repayments

Source: Mortgage Choice