LEVERAGING TARGET: What should my downpayment be?

[Thomas J. Clifford]

I'm leaving the newbie RE investor phase of education and gearing up to look for my first purchase/purchases. I plan to do another 30 year refi on my primary residence and walk away with slightly smaller monthly payment, but using the cash-out of $168k as purchase capital.

I know there is a debate regarding buying an investment property in full vs buying properties with leverage, but I'm having trouble pinpointing a good place to work out pros/cons on which avenue to pursue.

A) What pros/cons do you know of to buying one property in full to obtain a higher monthly cash flow?
B) If I opt for buying more properties under conventional loans - would you recommend higher down-payments and fewer properties or go all out and snatch up as many deals as I can?

I'm leaning toward B unless there is something about A that I didn't consider, and I'm thinking of leaving about 25-30k for each leveraged property for repairs/reserves. Does that sound reasonable, or is that still too ? What recommendations do you have? Maybe not handle these purchases each at the same time, but stagger them out?

I appreciate any insights. Thanks in advance!

T.

[Jaysen Medhurst]

@Thomas J. Clifford, this comes up a lot on BP, so it's worth your time to research what else has been written.

Short answer: leverage allows you to scale faster and multiplies your returns at the "cost" of more risk and restrictions (e.g., meeting lender underwriting requirements).

Something to keep in mind: you can buy cash and then finance later. This is the best of both worlds. 

A few other thoughts:

• No leverage means higher cash flow, but your ROI will be greatly diminished. You're not "making" cash flow, you've "bought" it. Don't confuse the two. You also miss out out on one of the four REI money makers: mortgage pay down.
• A property should cash flow well with 75% LTV.
• $25-30k of reserves for each property is probably way too much, assuming you're looking at SFR or small MFR. A few grand per unit is good and then put ~15% of rents aside for repairs and CapEx.