Weird Strategy for High Income individuals
Hi guys,
I would like to ask about your opinions and views about the following strategy.
Let us assume that I am a high income individual with full time job and I want to invest in Manhattan where prices are just ridiculous. I want to buy a 2 bedroom apartment which costs 700k$ and rent it out for 3k$ per month. It is as far away from the 2% rule as you can get.
However, what if I put down 210k$ and take a mortgage for the rest ? The property should cash flow and I use the leverage a little bit.
The question is : Do you think that this is ''safe'' way to invest in RE for High - Income individuals ?
Thank you for your views.
Simon
Most Popular Reply
It doesn't matter if you are a high income individual. Anyone who can get leverage can use it.
But, the cost of the property is still $700,000 whether you take a loan on it or put down cash for it. On an investment property you're going to need to put down 20% anyway and on $700,000 place, you're going to have to put down $140,000 at a minimum.
In some markets, if you have $210,000 cash you can get much more than $3,000 in gross income and you don't have to spend the whole $700,000.
The only reason to buy in a place like Manhattan is that you buy that $700,000 place for $500,000 and expect that $700,000 place to be worth a million dollars in a few years.