$80k in Cash and Ready to make the leap...

[Anthony Feola]

I have had a passion for real estate investing for a long time but never put the passion to use. Now that I have educated myself the last few years in my path to becoming a Financial Advisor (understanding and learning Real Estate is almost mandatory when being a financial advisor) I wanted to make the leap to expand my investing portfolio. 

To keep things short, I have $80k in liquid cash and was tempted to buy a small condo/apartment unit within a complex in cash. The more I read and the more I talk to investors, they advise a different approach in putting a couple down payments on maybe 2 multi-family deals instead. 

I guess my question is what would some of you recommend? My thought process is with a paid for rental unit I will be able to snowball real estate investments much faster than leveraging multiple deals at one time...Thoughts?

[Brandon Rush]

Hey Anthony,

Great to hear you are ready to pick up some real estate. So is it worth buying a condo unit in cash? I would say the answer depends. There are two sides to this:

1) Super safe and bullet proof route, paying in cash. By paying for the unit in cash, you never have to worry about a mortgage while owning it and can benefit from more net income on the property. Also, if the market ever tanks and prices go down, you are still protected as you have 100% equity in your property. Unfortunately paying with cash with result in extremely slow growth. But, if you have a significantly high salary that can regularly support paying cash for properties, that may not be the worst idea. But, if have a "normal" salary, I would not recommend this route. 

2) The common investor route, buy properties with a mortgage on them. This is the route I would personally suggest. Taking on a mortgage will allow for a higher return on your money compared to paying cash. There are not too many investment vehicles that allow you to purchase an asset worth hundreds of thousands of dollars for 25% of the cost upfront, and allow you reap all of its benefits as if you owned it 100%. 

If I were you, I would Google paying cash for rental properties vs mortgaging them and you will find your answer. My recommendation, use leverage and get a higher return on your money. Yes there is risk in leverage but if you buy right, you will minimize your risks. 

Good luck on your journey!