Spend more and leverage or spend less and use cash?

[Rita Oliva]

There are two scenarios below for a first purchase. What would you do? Let's say you could buy a turnkey property for a market value $67k that cash flows at $400 a month after all expenses. With a 20% down payment and closing costs, you are in it for $17k. You don't have much equity in the property but the acquisition cost is low and it cash flows immediately. You also could buy an equivalent property off market for $55k. It will only need about $1-2k to make it rent ready and once rented t will rent for the same amount as the property above. Since the purchase price is low, you would have to buy it will cash. You need $60k cash upfront to buy the property and get it rent ready. Let's say the ARV will be $67k. Which option would you choose if you only had $60k to invest and plan to build a portfolio of buy and hold properties?

[Shawn Mcenteer]

I think you will acquire property faster by spending more and leveraging.  At the end of the year if you bank your cash flow you are looking at roughly 5k where as if you refi your cash deal it has potential to be substantially more cash to buy another at a quicker rate assuming all goes well with rehab.