Buying a property in cash at 21?

[Sarah Jenson]

Hi there, I'm 21 years old and interested in entering the real estate market. I currently have a substantial amount of money, totaling a few hundred thousand dollars, available in cash. However, I'm facing challenges when it comes to qualifying for a loan due to my lack of a traditional W-2 job, despite having good credit and being debt-free. My parents are experienced real estate investors who typically purchase properties outright using cash, often focusing on properties that require renovation. They consistently emphasize the benefits of cash purchases over leveraging through loans. On the other hand, various educational resources on real estate advocate for utilizing leverage when making purchases. I'm torn between the two approaches. Should I proceed with a cash purchase, or are there alternative options worth considering?

[Nathan Gesner]

Quote from @Sarah Jenson:

Read a few books on real estate investing to learn the power of leverage. I like the Unofficial Guide to Real Estate Investing by Spencer Strauss. Here's a very basic explanation to get your juices flowing:

Assume a house costs $200,000 and rents for $1,500. The market appreciates 3% per year.

Pay cash for one house and rent it for $1,500. After five years you'll have earned $90,000 in rent income and gained $34,000 in appreciation for a total of $124,000.

Buy four houses with $50,000 down on each. Mortgage payment is $1,000 on each house, so you're essentially earning $500 per house or $2,000 a month. After five years you'll have earned $120,000 in rent income and gained $136,000 in appreciation for a total of $256,000. You've earned $132,000 more by splitting your money and leveraging it. 

You could purchase a property for cash now and then refinance it later when rates are lower and you qualify for loans.