Is leverage safe or risky?

[Chase A.]

Is it safer to own a property free and clear rather than leveraging? If the real estate market crashes again like it did in 2007-2008 aren't people who are leveraging at a risk to loose everything?

[Jason D.]

Depends on what you are doing with real estate. If I have 1 property worth $100k free and clear and cash flow $1000 per month, and the market drops 20% I have a property worth $80k that will still cash flow $1000 per month. The last recession taught us that rents are largely unaffected by a housing down turn. If I had that same $100k invested in 5 properties valued at $100k apiece, I would be cashflowing near $3000 per month. I would loose the same percentage of equity, but still make 3X the cash flow. Equity only matters if you sell so if your plan is to hold and rent, leveraging your money doesn't add much risk but yields a larger return.