HELP!!! My financial advisor said I'm over leveraged
Investor · Dallas, TX · Member since 2021 · 24 posts · 28 votes
HELP!!! My financial advisor said I'm over leveraged
Most Popular Reply
Real Estate Investor · Unadilla NY · Member since 2017 · 418 posts · 297 votes
5yTell him no problem and drop him and his fees, then you wont be leveraged as bad. I'm 90 percent serious about this. For a quarter of what your paying him hire me and I'll tell you twice as frequently you don't have enough money.
You could sell some of your properties to be less leveraged and make less cash flow.
You could really vet your tenants to make sure they don't screw you over.
You can hold ample reserves of cash for the "what if" scenarios.
Get a HELOC if you don't have it already and use it if you have to.
Take out a blanket mortgage and tap some of your equity to pay a property or two off free and clear. Stick those in a separate LLC so if the world does come crashing down you won't have to lose those in theory.
73 Replies
- Member since 2017 · 3 posts · 1 vote5y
This is completely dependent on your market. If you are over leveraged in say California, new York city , or Miami then yes you need to protect yourself as these are markets that may be in trouble soon.
if you’re in a more stable rental market like Memphis or Indiana, then as long as you’re cash flowing and paying all the bills what does it matter?
Overall my best guess is that your financial advisor doesn’t have any actual experience in real estate. Most don’t
- Investor · Dallas, TX · Member since 2021 · 24 posts · 28 votes5y
WOW I really appreciate all the responses. I think my post was trending for awhile LOL. So here are some more details based on all the comments
1. My financial advisor does not invest in real estate but has clients that do
2. I don't pay him a direct fee but he is also my life insurance guy so he gets paid from my policy
2. My 10 properties cash flow at least $200 per month per property, some properties more than that
3. My wife and I have W2 jobs with a combined household income of $450k, not including real estate investments
4. I have over 200k in a 401k, another 200k in cash value life insurance, and another 150 in a HELOC
5. My properties have a combined 500k in equity
Based on this information what is my best option?? I'm thinking stack up enough reserves in my LLC to weather the storm.
Thanks everyone
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes5y
Originally posted by @Idris Haroon:
So I just got off the phone with my financial advisor and he said I'm doing well but he's concerned I'm over leveraged on real estate. He's concerned that if we experience another recession that I will be stuck holding the bag for all the mortgages on my rental properties. Is anyone else concerned about this? If so how are you planning ahead to make sure this isn't a problem if we experience another recession and your tenants cant pay rent?
Thanks
There are really only two kinds of people on these forums. Those selling something and those who have no idea what they are talking about. I doubt either group of people's ability to provide you with any reasonable advice on this topic based upon the amount of info you've provided.
- Investor · Fremont, CA · Member since 2015 · 209 posts · 124 votes5y
Originally posted by @Idris Haroon:
So I just got off the phone with my financial advisor and he said I'm doing well but he's concerned I'm over leveraged on real estate. He's concerned that if we experience another recession that I will be stuck holding the bag for all the mortgages on my rental properties. Is anyone else concerned about this? If so how are you planning ahead to make sure this isn't a problem if we experience another recession and your tenants cant pay rent?
Thanks
The issue usually is liquidity not leverage. Please make sure you have 6 month reserves. Be dynamic to lower rents when required to get tenants in. You will maximize chance of success. Surviving such time, if encountered, you will come out stronger.
If you advisor is trying to get you to diversity, you need to work on that in long run. May not be immediately.
- Investor · Fremont, CA · Member since 2015 · 209 posts · 124 votes5y
Originally posted by @Idris Haroon:
WOW I really appreciate all the responses. I think my post was trending for awhile LOL. So here are some more details based on all the comments
1. My financial advisor does not invest in real estate but has clients that do
2. I don't pay him a direct fee but he is also my life insurance guy so he gets paid from my policy
2. My 10 properties cash flow at least $200 per month per property, some properties more than that
3. My wife and I have W2 jobs with a combined household income of $450k, not including real estate investments
4. I have over 200k in a 401k, another 200k in cash value life insurance, and another 150 in a HELOC
5. My properties have a combined 500k in equity
Based on this information what is my best option?? I'm thinking stack up enough reserves in my LLC to weather the storm.
Thanks everyone
Equity will not help you in liquidity crunch. Please make sure you have 6 month payments for all properties together. 1 year if you want to be conservatives. You need to be able to protect yourself from lenders in case of a liquidity event.
- Real Estate Broker · St. Louis, MO · Member since 2014 · 206 posts · 194 votes5y
OK.... My opinion.
1. My financial advisor does not invest in real estate but has clients that do. (OK)
2. I don't pay him a direct fee but he is also my life insurance guy so he gets paid from my policy. (Doesn't seem like he has a vested interest in discouraging you from real estate unless he is pushing you to further fund a life policy with what you would otherwise invest in RE. FYI... I really dislike insurance policies that are disguised as investments. Just get a term life if you need one, otherwise it is probably one of the worst investments (and highest fee) purchases you can ever make.)
2. My 10 properties cash flow at least $200 per month per property, some properties more than that. (This is an issue! I'm not sure if we are talking 250k properties or 50k properties, but I don't like those cash flow numbers either way. Any rent rate declines, vacancy, or repairs (roofs, plumbing, etc.) will put you cash flow negative really quick. Not the purpose of this thread, but I would reconsider your investment strategy if this is all you are cash flowing per deal).
3. My wife and I have W2 jobs with a combined household income of $450k, not including real estate investments. (This is a positive depending on (1) job security/income stability and (2) your current lifestyle. If you have significant reliable cash flow from your W2 AFTER all of your personal expenses this can provide a cushion/bailout if your RE investments get into trouble.)
4. I have over 200k in a 401k, another 200k in cash value life insurance, and another 150 in a HELOC. (Not liquid and major penalties)
5. My properties have a combined 500k in equity. (This is good, but that is not liquid funds, and liquidity is what you need if things go south. You can't fund cash flow deficits with equity.)General advice.... If you are consistently banking a large chunk of your W2 income and it is reliable then I think you are likely fine. If the market turns, you simply stop banking your monthly income surplus and use your W2 to fund real estate investment deficits. Things could be painful, but you could likely weather the storm.
If you do not have a significant w2 income surplus, then I would suggest de levering. Sell your worst performing properties and use that equity to reduce debt on the best performing existing ones. Then strategically find other deals with a better cash flow margin.
My biggest gripe with what you describe is the $200 month cash flow per property number. You are taking on a lot of debt, risk, headache, etc. for a measly $2400 month cash flow. You would be better off buying a REIT.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes5y
Originally posted by @Idris Haroon:
WOW I really appreciate all the responses. I think my post was trending for awhile LOL. So here are some more details based on all the comments
1. My financial advisor does not invest in real estate but has clients that do
2. I don't pay him a direct fee but he is also my life insurance guy so he gets paid from my policy
2. My 10 properties cash flow at least $200 per month per property, some properties more than that
3. My wife and I have W2 jobs with a combined household income of $450k, not including real estate investments
4. I have over 200k in a 401k, another 200k in cash value life insurance, and another 150 in a HELOC
5. My properties have a combined 500k in equity
Based on this information what is my best option?? I'm thinking stack up enough reserves in my LLC to weather the storm.
Thanks everyone
OK, so my ragged thoughts based on these assumptions: 10 properties @ $200/door (let's average conservatively), which probably means about 80% leverage on each one, and you have 500k of equity, so let's call that $2.0 million in loans out on $2.5 million worth of property, let's assume about 1% property tax and 1% insurance, and 4% loans, so that should leave you with a PITI of about $9700 monthly. Let's call it $10k monthly for easy numbers.
1. OK so he has some people to compare to. That's helpful. It still doesn't mean he is that well versed about real estate but you could ask him some questions to see how much he understands.
2. OK but agree with @William Jenkins on life insurance.
2.5. I personally think that's a lot of leverage. $12-13k monthly income with $10k PITI costs is pretty steep.
3. That's a pretty healthy income - $38k before taxes monthly. Even if you live a relatively rich existence of $15k/month in expenses you should be putting $10-15k monthly away in reserves/investments. So it sounds like you could scale into covering your RE shortfall just with your W2s. The cheaper you live, the safer this strategy is.
4. The HELOC is nice but forget about it as a strategy. The other two, if you can borrow from them at low/no cost or redeem with little/no tax hit, are good reserves. $400k could pay your PITI for 3 years without a drop of income.
5. Covered above. Meaningless unless you need to sell in a fire sale.
Based on what you've posted and my assumptions of your base numbers, I think you could handle any shortfall pretty easily. Personally, I think that's a lot of leverage for the amount of income that's being produced - unless you think you're in a super high growth area, why would you want to have that much money in something making such a paltry sum - but it doesn't sound like you'd have any trouble absorbing non-paying tenants or other issues that force landlords to lose their assets. That's really the heart of overleverage - how long can you hold the asset without being forced into a sale, foreclosure, bankruptcy? Based on your numbers it looks like that number is virtually indefinitely.
Skyline Properties - Real Estate Broker · Kansas City, MO · Member since 2015 · 33 posts · 13 votes5y
@JD Martin
First I just love your title 😍🥰😘
Second, I love everything you said giving us some grounded advice so thank you for sharing your thoughts.
Third you earned a new woman crush
That is all - goes back to reading the thread lol 😆
- Investor · Shakopee, MN · Member since 2014 · 219 posts · 88 votes5y
Originally posted by @Idris Haroon:
WOW I really appreciate all the responses. I think my post was trending for awhile LOL. So here are some more details based on all the comments
1. My financial advisor does not invest in real estate but has clients that do
2. I don't pay him a direct fee but he is also my life insurance guy so he gets paid from my policy
2. My 10 properties cash flow at least $200 per month per property, some properties more than that
3. My wife and I have W2 jobs with a combined household income of $450k, not including real estate investments
4. I have over 200k in a 401k, another 200k in cash value life insurance, and another 150 in a HELOC
5. My properties have a combined 500k in equity
Based on this information what is my best option?? I'm thinking stack up enough reserves in my LLC to weather the storm.
Thanks everyone
This is what I would say.
1. Financial advisors don't make money on your real estate. To them it's a risk for you, with no income from them. Most would suggest you lower your real estate holdings. It's just good business sense for them.
2. You have $500k in equity, what's the debt tied to that? Your debt/equity ratio is your biggest measurement for risk on the real estate. and probably the biggest question on if you are over-leveraged. If properties drop to half the value, are you still positive, if so, you are probably fine.
3. You have good incomes. If you aren't spending much and continuing to put a buffer into savings / other investments every month, that mitigates any potential risk. Would you be able to survive on just one income? If you are making $450k a year and your expenses or $150k a year outside of real estate so your putting away an extra 100-200k a year, you're going to be fine no matter what happens to your real estate.
Overall, I think you are fine.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes5y
Originally posted by @JD Martin:
Originally posted by @Idris Haroon:
WOW I really appreciate all the responses. I think my post was trending for awhile LOL. So here are some more details based on all the comments
1. My financial advisor does not invest in real estate but has clients that do
2. I don't pay him a direct fee but he is also my life insurance guy so he gets paid from my policy
2. My 10 properties cash flow at least $200 per month per property, some properties more than that
3. My wife and I have W2 jobs with a combined household income of $450k, not including real estate investments
4. I have over 200k in a 401k, another 200k in cash value life insurance, and another 150 in a HELOC
5. My properties have a combined 500k in equity
Based on this information what is my best option?? I'm thinking stack up enough reserves in my LLC to weather the storm.
Thanks everyone
OK, so my ragged thoughts based on these assumptions: 10 properties @ $200/door (let's average conservatively), which probably means about 80% leverage on each one, and you have 500k of equity, so let's call that $2.0 million in loans out on $2.5 million worth of property, let's assume about 1% property tax and 1% insurance, and 4% loans, so that should leave you with a PITI of about $9700 monthly. Let's call it $10k monthly for easy numbers.
1. OK so he has some people to compare to. That's helpful. It still doesn't mean he is that well versed about real estate but you could ask him some questions to see how much he understands.
2. OK but agree with @William Jenkins on life insurance.
2.5. I personally think that's a lot of leverage. $12-13k monthly income with $10k PITI costs is pretty steep.
3. That's a pretty healthy income - $38k before taxes monthly. Even if you live a relatively rich existence of $15k/month in expenses you should be putting $10-15k monthly away in reserves/investments. So it sounds like you could scale into covering your RE shortfall just with your W2s. The cheaper you live, the safer this strategy is.
4. The HELOC is nice but forget about it as a strategy. The other two, if you can borrow from them at low/no cost or redeem with little/no tax hit, are good reserves. $400k could pay your PITI for 3 years without a drop of income.
5. Covered above. Meaningless unless you need to sell in a fire sale.
Based on what you've posted and my assumptions of your base numbers, I think you could handle any shortfall pretty easily. Personally, I think that's a lot of leverage for the amount of income that's being produced - unless you think you're in a super high growth area, why would you want to have that much money in something making such a paltry sum - but it doesn't sound like you'd have any trouble absorbing non-paying tenants or other issues that force landlords to lose their assets. That's really the heart of overleverage - how long can you hold the asset without being forced into a sale, foreclosure, bankruptcy? Based on your numbers it looks like that number is virtually indefinitely.
Spot on answer from JD. Honestly after posting the details, it just validated my original assumptions. I have just seen it too many times. Your "Financial Advisor" is actually an Insurance Salesman. Those insurance policies are extremely profitable for the agent. Odds are good he will push you to buy more insurance. Buying real estate gets in the way of his paycheck.
With incomes of $450K, you and your wife are obviously intelligent, talented and experienced professionals. Don't let some sales guy take your hard earned cash. I promise in ten years, you will look back at those real estate investments and wish you would have done more deals.
- Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes5y
Originally posted by @Joe Splitrock:
Originally posted by @JD Martin:
Originally posted by @Idris Haroon:
WOW I really appreciate all the responses. I think my post was trending for awhile LOL. So here are some more details based on all the comments
1. My financial advisor does not invest in real estate but has clients that do
2. I don't pay him a direct fee but he is also my life insurance guy so he gets paid from my policy
2. My 10 properties cash flow at least $200 per month per property, some properties more than that
3. My wife and I have W2 jobs with a combined household income of $450k, not including real estate investments
4. I have over 200k in a 401k, another 200k in cash value life insurance, and another 150 in a HELOC
5. My properties have a combined 500k in equity
Based on this information what is my best option?? I'm thinking stack up enough reserves in my LLC to weather the storm.
Thanks everyone
OK, so my ragged thoughts based on these assumptions: 10 properties @ $200/door (let's average conservatively), which probably means about 80% leverage on each one, and you have 500k of equity, so let's call that $2.0 million in loans out on $2.5 million worth of property, let's assume about 1% property tax and 1% insurance, and 4% loans, so that should leave you with a PITI of about $9700 monthly. Let's call it $10k monthly for easy numbers.
1. OK so he has some people to compare to. That's helpful. It still doesn't mean he is that well versed about real estate but you could ask him some questions to see how much he understands.
2. OK but agree with @William Jenkins on life insurance.
2.5. I personally think that's a lot of leverage. $12-13k monthly income with $10k PITI costs is pretty steep.
3. That's a pretty healthy income - $38k before taxes monthly. Even if you live a relatively rich existence of $15k/month in expenses you should be putting $10-15k monthly away in reserves/investments. So it sounds like you could scale into covering your RE shortfall just with your W2s. The cheaper you live, the safer this strategy is.
4. The HELOC is nice but forget about it as a strategy. The other two, if you can borrow from them at low/no cost or redeem with little/no tax hit, are good reserves. $400k could pay your PITI for 3 years without a drop of income.
5. Covered above. Meaningless unless you need to sell in a fire sale.
Based on what you've posted and my assumptions of your base numbers, I think you could handle any shortfall pretty easily. Personally, I think that's a lot of leverage for the amount of income that's being produced - unless you think you're in a super high growth area, why would you want to have that much money in something making such a paltry sum - but it doesn't sound like you'd have any trouble absorbing non-paying tenants or other issues that force landlords to lose their assets. That's really the heart of overleverage - how long can you hold the asset without being forced into a sale, foreclosure, bankruptcy? Based on your numbers it looks like that number is virtually indefinitely.
Spot on answer from JD. Honestly after posting the details, it just validated my original assumptions. I have just seen it too many times. Your "Financial Advisor" is actually an Insurance Salesman. Those insurance policies are extremely profitable for the agent. Odds are good he will push you to buy more insurance. Buying real estate gets in the way of his paycheck.
With incomes of $450K, you and your wife are obviously intelligent, talented and experienced professionals. Don't let some sales guy take your hard earned cash. I promise in ten years, you will look back at those real estate investments and wish you would have done more deals.
BUT...he really does have a serious looking investment problem. He does not have 'real' cash flow. This is from his profile :
Wholesale | Dec 2020 - Present
- Single-family residence in Dallas, TX Purchase price: $140,000.00 Cash invested: $30,000.00 Monthly cashflow: $300.00
We purchased this property from an investor who was underwater. We bought it half rehabbed at 140k and put 30k into it to make it livable. We now rent it out for 1500 per month. Our mortgage payment is 1200 per month.
------------------------------------------------------------------------------------------------------------end cut from his profile-----------
He is taking the rental income minus the mortgage payment as cash flow. He has ZERO $ for vacancies, cap ex, maintenance, management, administrative costs, water, sewer/septic, nothing as an expense except for the mortgage. Long term they are cash flow negative...there will be costs besides that mortgage.
I do agree that insurance salesmen are generally a pass as a PM. Finding a PM that is more balanced should help him. He does need a PM that can go over the costs associated with owning a house and running a rental business so he can have a cash flow number that will be realistic long term. He should be banking the real costs that will come. He is set up for a crash, just it will take him longer to crash if his regular salaries remain stable so he can dip into them.
- Single-family residence in Dallas, TX Purchase price: $140,000.00 Cash invested: $30,000.00 Monthly cashflow: $300.00
- Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes5y
Did you put 25% down? 3 to 1 doesn't sound over leveraged. 32 to 1 at 3% down now that sounds over leveraged.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes5y
Originally posted by @Kanita Jefferson:
@JD Martin
First I just love your title 😍🥰😘
Second, I love everything you said giving us some grounded advice so thank you for sharing your thoughts.
Third you earned a new woman crush
That is all - goes back to reading the thread lol 😆
LOL...thank you! You're gonna make me get a big(ger) head!
Skyline Properties - 5yJustin BrownBusiness MemberReal Estate Agent · Allentown, PA · Member since 2017 · 343 posts · 156 votes
Originally posted by @Jay Hinrichs:
Originally posted by @Jon Kelly:
@Jay Hinrichs we're saying similar things. I'm suggesting the financial advisor could be right and he should walk through scenario with real numbers and show the risk. However, cashflow is still the most important thing.
Being overleveraged in 2021 vs. 2007 is totally different.
There's always risk involved and the "what if" scenarios will never go away. That's what keeps a lot of people away from REI.
PS I really like Bethlehem and Easton very cool cute towns.. Allentown not so much LOL
Hey! What’s wrong with Allentown! Lol. Stop Jay and I’ll buy you coffee and a donut from MaryAnns and you will sing a different toon :-)
Light House Realty LV4.975 Reviews - Dentist · Taylorsville, UT · Member since 2013 · 102 posts · 68 votes5y
@Idris Haroon
What strategies are you using?
If you are using a buy and hold then I would be less concerned because if a recession does hit and many people do lose their homes, then demand for real estate rentals will increase.
Buy and hold is more about cash flow and long-term gains rather than the value of any single property at a given time.

- 5yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Justin Brown:
Originally posted by @Jay Hinrichs:
Originally posted by @Jon Kelly:
@Jay Hinrichs we're saying similar things. I'm suggesting the financial advisor could be right and he should walk through scenario with real numbers and show the risk. However, cashflow is still the most important thing.
Being overleveraged in 2021 vs. 2007 is totally different.
There's always risk involved and the "what if" scenarios will never go away. That's what keeps a lot of people away from REI.
PS I really like Bethlehem and Easton very cool cute towns.. Allentown not so much LOL
Hey! What’s wrong with Allentown! Lol. Stop Jay and I’ll buy you coffee and a donut from MaryAnns and you will sing a different toon :-)
I like Allentown ok but i think those others are just really cute smaller towns Lehigh valley is a very nice under the radar market.
- Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes5y
@Idris Haroon - leverage is not the issue, the bigger question is - how resliant are your tenants to an economic downturn?
It does not really matter if you are overweighted or not (I believe that is what your advisor really ment when he said over-leveraged, which indicates a lack of equity) as long as your tenant base can weather a storm.
We are very real estate heavy, I do not trust paper assets very much.
We learned this with Covid that some tenants are economically more exposed to economic changes - for example in the service industry. We rent to families with double income, most of them have professional careers and started working from home. Consequently we had zero rental losses last year. If you owned one bedroom low income units last year you were looking at a different picture.
The fact that you cashflow only $200 a month tells me that you are not investing in cheap units; given the national housing shortage which will take a very long time to resolve at the current construction pace, you should be gaining equity on a pretty healthy pace.
We have not seen rents respond to the 4.2% inflation yet, but I expect that to happen in 2022 and with that you should see also your cash flow go up. I would also look at your loan structure and make sure you shift as much as you can into long term fixed rate debt, if you are commercial look for at least 7 or better 10 years and 25 year ammortisation.
- Lender · FL · Member since 2020 · 68 posts · 38 votes5y
@Idris Haroon: The most important thing in building wealth is CONTROL. If you take your broker's advice and invest in the stock market, you won't have any control...instead millions of other very emotional people will control your future. Real estate provides more control. My 2¢.
- Investor · Fremont, CA · Member since 2015 · 209 posts · 124 votes5y
Originally posted by @Dave Spector:
@Idris Haroon: The most important thing in building wealth is CONTROL. If you take your broker's advice and invest in the stock market, you won't have any control...instead millions of other very emotional people will control your future. Real estate provides more control. My 2¢.
I disagree. Real Estate also goes by same valuation criteria in long run, discounted cash flow analysis. How much P/E investors are willing to provide. For last 30+ years they acceptable yield for investment has been going down. So prices went up. I believe going forward yields will go up, prices will be growing slower.
Stocks on the other hand reflect reality faster than Real Estate thats all.
- Lender · FL · Member since 2020 · 68 posts · 38 votes5y
My point is: with real estate, the owner controls the asset. In the stock market, thousands of shareholders control the price and self-interested management makes all the decisions.
- 5yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Idris Haroon:
WOW I really appreciate all the responses. I think my post was trending for awhile LOL. So here are some more details based on all the comments
1. My financial advisor does not invest in real estate but has clients that do
2. I don't pay him a direct fee but he is also my life insurance guy so he gets paid from my policy
2. My 10 properties cash flow at least $200 per month per property, some properties more than that
3. My wife and I have W2 jobs with a combined household income of $450k, not including real estate investments
4. I have over 200k in a 401k, another 200k in cash value life insurance, and another 150 in a HELOC
5. My properties have a combined 500k in equity
Based on this information what is my best option?? I'm thinking stack up enough reserves in my LLC to weather the storm.
Thanks everyone
what about your reserve accounts.. although 450k of yearly income cures most ills as long as your not spending 350k to live
so 50k equity in each property still is that 50k on 100k props or 50k on 300k props thats the question.. but looks like to me your in pretty good shape all around I suspect the amount of peeps on BP making 40k a month in salaries is not great.. So that is a fantastic situation that I am sure you and your wife have worked very hard to get to.
If these are Texas mortgages then your financial advisor maybe worried about potential liablity of a personal nature on the loans which might exceed your net worth.. He could be looking at it simply that way.
- Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes5y
I think there are 3 basic models to buying real estate. You can use the model that is all leverage or almost all leverage....buying using OPM...other peoples money. Plenty of giant real estate operators have done that and either lost it all or nearly lost it all when times got lean...like our former president. Happened to plenty of small and big investors plenty of times....last time around 2007/2008/2009...all kinds of crazy stories out there like this one... https://www.wsj.com/articles/S...
Then there are the all cash guys like the legendary Roy Kelley of the Hawaii Outrigger hotel fame who I understand paid cash for everything. Old school guy....but kept him out of trouble when the markets crashed and there is opportunity to pick up others mistakes at bargain prices.
The 3 model is probably somewhere in the middle....some leverage, but keep plenty of cash or liquid reserves to cover the uncertain times.....there are times when people don't pay rent....there are owners out there right now that have not seen a rent payment in the year. Where would that put you if that happened? How would that affect you or your family? One of the problems with leverage is when the it hits the fan....it tends to happen all at once....borrowing goes in the toilet, your credit card limits shrink with no notice, you loose your job, your tenants loose their jobs, no one is moving because they don't have jobs or want to play safe, no one is buying because they can't get loans or loans are more restrictive.
We just saw some of that with Covid, but we've seen it plenty of times before.
One thing you can do to prepare if you decide to go full leverage route....is learn to be a good negotiator....Renegotiate your loans with your lenders, negotiate with your tenants to pay something...anything....and negotiate with everyone who owes you money to get something, and everyone you owe money, to take less.
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