Buying first rental property

2 Replies

Looking to purchase my first rental property . Getting mixed opinions from investors I know on whether to use all cash or get a mortgage. Was planning on buying cash, getting a tenant, then cashing out to get another one, and so on...... what do you guys think? I’m a newbie. I have a contracting business that feeds me well. My goal for purchasing real estate is for the long term .. TIA! Matt

@Matt Rathgeb

Depends, how much of a Dave Ramsey fan are you?

People will swear leverage, leverage, leverage. Others will say pay cash when you can. I'm an "expert at my own opinion" so here are my thoughts.

I never want to be over-leveraged and feel like I can't handle my properties in case something goes south. In a perfect world where I had not necessarily Millions upon Millions of dollars, but a decent amount, I would have all my properties paid for--Cash. It just eliminates a huge headache of risk. 

So assuming you have some money, I would start slow with a first property, most likely 25% down and start to feel it out. After a couple of months, you'll start to get a feel for how you are doing and if you want to invest more. I think at least for the first property, it gives you a few more options with you having cash on hand. 

Congratulations Matt! I agree with Travis about holding onto some cash. I would add that there are unexpected expenses and more deals around the corner for which cash reserves make sense. Also, leverage is important for your future plans. If you choose to finance all or part of your deal, then you have an opportunity to start a relationship with professionals who provide valuable knowledge and skills to you. Good luck! Gennifer

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