Newbie question about leveraging

[Eric Bates]

Sorry A newbie question is it better to have a rental property paid off making $800 after taxes and insurance or to borrow against that house to buy another house so after mortgage payment you would make let's say $300 a month and the new property you make $500 after everything is paid so now you are back to the $800 a month I don't understand the benefit of leveraging the first house to make the same amount of money sorry if this is a dumb question I was reading an article saying you should leverage rental properties 

[Chris Davidson]

@Eric Bates young leverage allows you to build equity while generating cash. In the scenario of borrowing against the original house and buy another would be the same as getting a loan on the second house. However if you borrow against the 1st house you have the cash for a quicker close and can buy properties that can't be financed. Either way in your scenario you now have two houses and making 800 a month while paying down your debt (gaining equity) and also if the properties appreciate you gain that equity but in two instead of one. It is just risk reward. You take the risk on and inturn should have a larger reward if you bought correctly.

Hope that helps