All cash or nah in Memphis

[Nic S.]

I have about $150k to invest into my 5th property. I am leaning towards and all-cash buy in Memphis with a fantastic turnkey operator. My focus is on cash flow.

What am I not thinking about??

I am leveraged on the other 4 properties and like the idea of having a paid off asset.

[Joe Villeneuve]

This time, let me try to give you an answer without the "clouds" in the way.

The bottom line is this...math. 

1 - If you put $150k cash into a $150k property, and the property has positive CF, that property costs you $150k.
2 - If you put $150k cash into a $150k property, and the property has negative CF, that property costs you $150k...plus, all the negative CF...and is a bad deal.
3 - If you put $30k cash into a $150k property, and the property has positive CF, that property costs you $30k.
4 - If you put $30k cash into a $150k property, and the property has negative CF, that property costs you $30k...plus, all the negative CF...and is a bad deal.

...but,...

5 - If you put $150k into a property that only gets $1000/m in CF ($12k.yr), it will take you 12.5 years to recover your cost ($150k).  That means you don't start making a profit until the middle of year 13...and that's a terrible deal.
6 - If you put $30k into a property that only gets $500/month in CF ($6k/yr), it will only take you 5 years to recover your cost ($30k)...and that's a great deal.

...further more...

7 - If you spend $150k on one $150k property all cash, you own $150k in property value.  If your PV appreciates 10%, you only gained $15k in PV and free equity.
8 - If you spend $150k, $30k per property (DP), that's 5 properties worth $150k each, which means that $150k is now buying you $750k in PV, and that 10% appreciation will get you an additional $75k in PV, and free equity.