CASH VS LOAN

[Phillip Gonzales]

Hello so I have been looking at properties from the 50k price range and lower. Some of these are nice town homes or condos heck even a few SFR. I was wondering from a different perspective if it is worth taking a loan out against these type of residences or doing all cash. I can put down 20% but not all cash. would this make sense to take a loan out on these type of properties. They still cash flow nicely and I fig could pay them off within 3 years

[Christopher Giannino]

@Phillip Gonzales

I agree with the others about taking a loan. You have to take in account your Return on Investment when purchasing a rental unit. The less money you put down the higher your ROI is.

Say you purchase a rental with a cash flow of $200/month. If you purchase the rental for $50,000 and use all cash to purchase this property the ROI would be 4.8% for the year.

$200(cash flow) x 12(months)=2,400 yearly cash flow   2,400/50,000 cash payment = 0.048

Now same situation, cash flow of 200/month but you only put 20% down and finance the rest of the $50,000. The ROI would be 24% for the year.

Purchase Price $50,000 x 20% = $10,000 down payment

$200(cash flow) x 12(months)=2,400 yearly cash flow   2,400/10,000=0.24

I hope you find this helpful!