Is there a better way ???

Question

Is there a better way for me to buy properties than the way I do it now?

I currently purchase rental property with 20% down and take out a 30, 15, or 10yr mortgage. I have done this for my past 17 properties. This has always seemed like the safe way to do it but is it the smart way.

Should I be using more bank money instead of my own by putting less down of my cash?

I'm not talking about realestate that I need to use cash to beat another bidder, just your average transaction.

Thanks

Jason Hanson · Answer

I would begin to avoid the banks whenever you can and purchase properties subject-to.

Also, wholesale properties throughout the year and use that money to pay down your rentals.

J Scott · Answer

This is a very personal decision.  Some people would argue that you should use OPM to the largest extent possible, even if it means leveraging yourself to the point where you risk being upside-down on properties if values decline.  Others would argue that leverage is bad, and that you should try to buy property with large down-payments, thereby protecting yourself even in the case of a major downturn.

While most people probably consider the right amount of leverage to be somewhere in-between (enough to build wealth quickly, but not so much as to risk getting wiped out if there is a downturn in your area), you need to decide what's right for you.

Some questions to ask:

- What is your plan?  This is the most important thing...your leverage amount should fit your long-term plan...
- What amount of leverage will still allow you to sleep well at night?
- How does additional leverage help your COC return?
- How does additional leverage help your total return?
- How much cash do you have on-hand?  Enough to buy more properties even without tremendous leverage?  Enough to cover yourself in the case where you need the reserves during a downturn?