Loan of $126K to $157K to start rental investment?

4 Replies

I am almost ready to purchase my first rental. The way I am doing this is by putting a mortgage or ELOC on a piece of property. I believe that I should be able to get between $126K to $157K. Now here is the question, would you use this cash as a down payment and buy multiple homes, or buy one or possibly two homes for cash? and how would you pay off the original load and grow the investment?

@Carl Talley  

Look up what "leverage" and make a decision from there.  I googled the term for you, the link is below this should get you started. 

https://www.investopedia.com/terms/l/leverage.asp

There are plenty of strategies to pay off your mortgage and grow your investment. Depending on which avenue you take will determine which strategy is best. Are you buying turnkey properties or distressed properties that need rehab? Are you buying Single Family Houses or Multifamiles? Are you buying for appreciation or cash flow? 

@Nick Rutkowski Thank you for your response. I should have been more clear in the description of my situation. I currently own a large track of land free and clear. I believe that I can leverage that property for $126K to $157K. So If I am able to get that cash on a 30 year loan at say 6%, I would have to make a payment of $760 to $950. I want to use that cash to purchase cash flowing properties, preferably multifamily. As far as turnkey or distressed, I would prefer to have the properties needing minimal work. I would like to keep some of the cash as a reserve for any unexpected problems. I was wondering how others might invest. Would you use the cash to purchase properties for cash, or get other mortgages/loans.  

I will only try to get one before getting carried away. Most of the areas home prices are or getting too expensive to make sense. In not very distant future the down hill ride is not fun for investors.  

This is basically asking the "pay cash or leverage" debate question, and you'll get every variance of response for it. Some people insist paying cash is safest and some (like me) vote leverage every time. But before I defend that position too hard, I do see you're in Florida and that makes me want to clarify... I think leveraging is the absolute best, depending on whether or not you're buying solid cash flow properties. I'm only triggered to say that because if you're buying locally, most places in FL won't cash flow. So I don't advocate leveraging if there isn't cash flow, but if there is then I definitely stand by it.

Here's details on comparing the options-

https://www.biggerpockets.com/renewsblog/2015/04/1...

Just a bit more on when to leverage...just be sure the cash flow return will be higher than the interest rate on the mortgage or ELOC. Otherwise it doesn't work out as well.

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