Now there is a great argument for leverage and I don’t dispute this. But there are a lot of guys that made those arguments a few years ago that are flat broke now.

Someone that is successful at leveraging is in the long term going to have a higher net worth then me — but some times those guys are going to lose and lose big. My chances of losing are very slim — and I will in time have considerable net worth. If I didn’t want to — I could live without working – my cash-flow level is signifiant. Most leveraged investors have to wait at least 10-15 years to be at that level.

Lastly, the whole renters paying off your mortgage thing — well I don’t have that. My renters pay for my lifestyle and for more rental properties for me. To me that is a better bargain!

Anyway — just my rambling on what has worked for me. I am good friends with many highly and medium leveraged (50% guys) real estate investors — and I understand their argument. i just prefer my method personally — each person has to decide for themselves! Good luck my friend!

Kevin

I like Rich Weese’s comment–it reflects my line of thinking. My husband has been gung-ho about getting all of our rentals paid off (a few are already free and clear, thankfully). Yet, in the same breath, he will get on my case for not leveraging those clear properties. (I am trying to leverage them–the non-owner-occ’d terms are awful, and I get my back up about them.)

My thinking, however (and I think I’m winning him over to the dark side), is to get a rental and make sure we cash-flow from day one (which we always do, thanks to my being very stingy), and then buy one to flip–take those proceeds and use them to buy the next rental, and so forth and so on. For example, my husband said his goal is to have a monthly profit of $X by the time he needs to retire. Being the little bean counter that he is, he calculated that 20 houses, all leveraged, would get us there. I turned the tables on him and showed him that I can get him that same amount of money with half the number of houses, all mortgage free. After he checked my calculations a dozen times, he realized I was right.

Of course, we all know the problem with this scenario–eventually, you run out of cash! That’s why I proposed the occasional flip, to feed our habit.

Again, I agree with the others, that your approach depends on your goals. For our rentals, we’re in it for the long-haul. My husband will reach retirement age in about 10 years, but really won’t have enough money to comfortably retire at that time. He refers to me as his little 401k because I make more than his retirement investments. So our goals are, in one respect, short-term. I’ve gotta get our monthly cash levels up in a relatively short period of time.

We also want our rentals to sustain us throughout our golden years. But I refuse to wait years for a property to make me money. I always want to clear about half of my rent as profit the first month rent starts coming in. If I can’t do that, I won’t buy the property. If I can do that from day one, it not only cash-flows now, but from here on out, too.

So I guess I’m trying to play both sides of the field. So far, so good.