I️ know it’s popular to “leverage” any cash on deals but it just seems better to wait till I️ could pay cash for anything. That way it’s owned outright and don’t have to stress tenants as much not paying or a flip not selling right away. Just wanna know some people’s experience with this. Thanks.
Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
8y
Problem with your logic is that you're trading risk for time.
time is WAY more valuable, and the risk is far less than you're assuming.
This strategy makes it impossible for you to scale. you can increase your wealth and income exponentially by using leverage and the risk does not increase by a direct correlation. Also, as you grow REALLY big, your risk starts to go down with economies of scale
Stress is a factor of emotion, not mathematics. The mathematics favor using leverage, the more you understand this the less emotional stress you will experience.
for the record: I used to think being debt free was ideal as well, and now I think that's crazy talk. I encourage you to keep learning.
I’m 23 now and getting married in September. So with a combined income later this year it would probably take about 5-7 years depending on how aggressive we save. Should have about 50-60 grand cash by then. Only debt would be our mortgage
Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
8y
Problem with your logic is that you're trading risk for time.
time is WAY more valuable, and the risk is far less than you're assuming.
This strategy makes it impossible for you to scale. you can increase your wealth and income exponentially by using leverage and the risk does not increase by a direct correlation. Also, as you grow REALLY big, your risk starts to go down with economies of scale
Stress is a factor of emotion, not mathematics. The mathematics favor using leverage, the more you understand this the less emotional stress you will experience.
for the record: I used to think being debt free was ideal as well, and now I think that's crazy talk. I encourage you to keep learning.
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
8y
I have a bunch of paid off rentals, so I get your thought process. It's nice being able to be patient with a vacancy and merciful to a worthy tenant when they could really use it.
But I didn't start out that way. I would recommend getting up to 5 or so with leverage in this rate environment before paying down. In the 5-7 years, (noble goal for sure) prices could be way up, rates way up, who knows? Appreciation increases will be larger than your savings rate. If you hope to save $60k in 5 years, that house you have your eye on could be 30% more. Think of prices now vs 5-7 years ago.
I like Dave Ramsey, too, but long-term fixed residential mortgages aren't what burned him. I say go for it with a mortgage if the rest of your financial house is in order and you don't have bunches of cc and car debt @Brandon Benton!
Also I️ wanna add that I’m not wanting to grow a huge “portfolio” just would like to have some passive income. I️ plan on continuing to work full time.