1 Property All Cash or several Properties with a down payment?

Question

As a new investor, I've been debating if I should buy a single investment property in all cash or diversify and buy 2-3 properties and putting ~30% down. Maybe buying 4+ with less than 20% down, perhaps?

Anyone else experience or thought about this before and could speak to it? Thanks in advance!

Anyone else experience or thought about this before and could speak to it? Thanks in advance!

Sarah Ziehr · Answer

Multiple properties!!

Tenants will be paying the PITI. Even if cash flow is low, they are building equity for you.

Jeff B. · Answer

An investor leverages his money to own/control properties using OPM(other people's money) via mortgages.  Buy&Hold investors creates a cash-flow from the rents.

Over time, especially in good growth areas, paying down the mortgage is treating your properties as a savings account, awaiting appreciation upon your exit(if any).

Jesus Minier · Answer

if I were in your position.. money wise. I would buy multiple properties as to not put all my eggs in one basket. Not only that but you would be making your money work for you multiple times instead of just once.

Thomas Kim · Answer

@Michael Noto: right, I forgot about the 25% down requirement when buying conventionally.

@Jesus Minier : that's what I would think - diversification is good. Just wasn't sure if you apply it to RE as well, but I guess that makes sense?

Jeff Beard: I agree that using OPM is best. Are you implying then that, going down the traditional lending path, you'd buy 4 properties @ 25% down and mortgaging the rest?

Brandon Ingegneri · Answer

How much profit will you make each month after your expenses in each scenario?  That is the question right there.  If having a few properties only gets you a few bucks more a month that the single that is paid off, then that is the route to go.  Very safe investment.  If you can produce better cash flow on a few properties while still having notes on them, and they are in good shape, that is something to explore too.  Also, I don't know your level of experience.  Are you able to efficiently manage several properties?  Once you answer those questions, you should have your answer.  Either way, your not in a bad position.

Jeff B. · Answer

Absolutely.  Even though we stepped into a MFU, Commercial Loan using a 1031, we closed with a mortgage in '97 - - balance is way down now, but the purchase money note (ie the original mortgage) is still in place today.

Michael Noto · Answer

If you are buying properties as a non-owner occupant and buying them conventionally you are going to need to put 25% down.

1 Property All Cash or several Properties with a down payment?

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