Buying a full property in cash vs. Financing several properties

[Eric V Harding]

This year has given us an opportunity to dig in to what we've wanted to do for a long time, BRRRR.

For our opening move, we could go all in and cash only with a nice turnkey property in Florida via a REI partnership firm. This seems like the best option as financing isnt an issue and the monthly cashflow will be muscular. However, it may take awhile to build equity in the property and thus buying a second property and repeating.

What is the argument for breaking up that cash and using it for down payments to several properties in the same market with the same REI firm? Would lenders even allow this?

[Joe Villeneuve]

The argument is in the math.  

1 - Paying all cash costs you more money since you are paying for the entire property out of pocket.  When you have a loan, the tenant's rent is paying for everything but what comes out of your pocket...the down payment.

2 - Saying you are getting better cash flow isn't true.  If you use the same money as down payments, you can get 5 of the exact same property (20% DP), which means higher Total CF using the same cash.

3 - Appreciation is applied to property values.  If you have 5 properties instead of just one, you are getting 5 times the appreciation.

4 - Profits are made only after you have recovered all of your costs.  The cash out of pocket is your only cost.  If you pay all cash, you have to recover 5 times as much cash as you would if you only used the cash as a DP.  

5 - If you need to pay more than a 20% DP in order for the property to cash flow, then don't buy the property.  All that added DP is doing is paying for all that negative CF upfront.