Using Cash Only vs Using OPM financing

[Simon Everett]

I am a senior in college right now.  My fiance will be going to medical school and I will get a full-time job when I graduate.  I am however, interested in building wealth through real-estate.  The only thing is that I do not like the idea of using OPM.  I have no credit, never taken out a loan for college, car or anything.  Paying cash is always best in my mind.  My goal is to buy at small single family home and build my portfolio over time eventually replacing income.  With cash you have no mortgae payment meaning more cash-flow.  What are yalls thoughts on cah only investing?  Besides the fact that it is obviously slower to do. 

OR

Tell me why you think that using OPM is just as good

[Thomas S.]

First as a investor you need to understand that cash/dead equity does not increase cash flow it buys cash flow while at the same time reducing cash flow from the property itself. Second when you state "I can not mathematically make financing work" what you are saying is you do not understand investing and finances. When I do numbers it is impossible for me to justify paying cash. When I value my cash at a 10% return and mortgages are below 10% the math is obviously against using cash.

Based on your statements what you need to do is research and educate yourself on finances and money management. Investing is about maximum returns on investments. The use of cash is the most conservative method of investing in real estate and produces the lowest possible ROI. For the majority of investors too low to justify the investment. Buying cash flow is not investing.

If a indivulaes goal is maximum returns cash is the worst possible option.

When buying with cash the maximum return it generates is the prevailing mortgage interest rate which for most investors is not worth the effort to justify the investment when it is far easier to get 8%,10%,12% or more in a conventional income fund investment.