Buying outright vs leveraging - Help a new member out!!

[Rick L.]

Newbie here to this site...first time posting.  My questions is this: Is it smarter to purchase a property outright vs. putting down payments on more than one property.  I understand that paying off a property means positive cash flow once rented.  However, in order to grow a portfolio, would it be smarter to try to get more than 1 or 2 properties for my money?  I don't mind borrowing if the long-term payout is better. 

My situation is this: I am due to inherit some crop land soon and would like to get deeper into residential rentals rather than cash-renting the land. I am considering selling the land as well as borrowing against it in order to come up with the money to purchase single-family, or multi-family rentals. Also considering a STR in a popular tourist area of my state. Complicating this issue is the need to do a 10-31 due to stepped up value/capital gains tax on half of the land.

I do have a small amount of experience in doing rentals in the past and we currently have two single family properties that bring in positive (but small) cashflow monthly.  One of the properties has about 50K in equity built up with a low interest rate on a 30yr loan.  The other is a mobile-home, worth almost nothing, that brings in twice as much money each month due to being paid off.  

I can't seem to wrap my head around the numbers regarding how much benefit I would get from leveraging my properties to purchase more.  My long-term goal is to have a decent cash flow in order to quit my W2 and work at real estate or property management full time.  No rush on that end, but I would like to get started...Thanks for any advice!

[Stetson Oates]

Quote from @Alexandra E Hartman:

Ya this has been exactly what I've been mulling on.  With interests rates at insane levels (the market I'm looking at seems to be over 10% for investors), a loan would deeply decrease my cash flow.  Is getting $50-100/month worth the hassle of the extra tenants and repairs?  Is it smarter to buy a house all cash now, with the plan to take a loan out when the market inevitably cools/crashes and interest rates are lowered?  Or maybe getting a loan and then having 3-4 properties vs. 1 is actually best for risk management.  Paying that much interest makes my skin crawl ha...

I've always looked at a property netting $100 per month as not worth anyone's time. At that point you are banking on appreciation 10 years down the road. If I'm going to be liable for $250K for 10 years, it better net me more than $100 per month. The issue is leverage, if used responsibly, it helps expand growth. If used irresponsibly it can crush you. Lots of investors are leveraged to the max. If there happened to be an event in the market that upset the financial lenders, they are toast. All cash or very low LTV leverage, you will sleep better and succeed in the longer run.