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Updated about 9 years ago on . Most recent reply

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Christa P.
  • Gretna, NE
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Invest $50k in one or two properties?

Christa P.
  • Gretna, NE
Posted

So I am doing my analysis on my first rental property. I am considering a 130k property and putting down $50k. When you run the numbers, the return cash on cash is around 9%. Brandon said in his last webinar that he doesn't want anything less than 12%. So would you say that this isn't a good investment or that I am putting too much cash on one property?  Maybe I should split the cash and buy two properties?  Then my return % would be higher?  Thoughts??

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JD Martin
  • Rock Star Extraordinaire
  • Northeast, TN
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JD Martin
  • Rock Star Extraordinaire
  • Northeast, TN
ModeratorReplied

All things being equal, your greatest rate of cash on cash return is going to be with minimal cash invested in maximum properties. One of the beautiful things about real estate is the power of leverage. Transaction fees as noted above - I assume he's talking about inspections, title work, etc - are non-factors in the grand scheme of things and should have little effect on whether you decide to split your funds into 2, 3, 10, or  whatever. The deal is always paramount, and if the costs of obtaining the property would sink the deal it was never a deal in the first place. 

So without seeing what properties you are talking about, 2 would be better than 1. 

Caveat 1: if you need to do rehab on these places, be sure you can carry rehab costs.

Caveat 2: Be sure you have enough cash available to maintain carrying costs during rehab and the inevitable things that will happen with real estate (vacancies, slow markets, etc). 

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