Thoughts on buying multi family all cash(duplex,triplex)

[David Pereira]

I just wanted to hear the thoughts of more seasoned investors. I currently house hack a duplex that I bought 2 years ago. I want to add to my portfolio intelligently and patiently, making sure I don’t over leverage. So my question is, if you had the money to buy a property all cash, would you do it? Not do it? 

Looking forward to hearing your thoughts. Thanks in advance. 

[Greg Scott]

Never.

Why?
1) Total returns improve with leverage.  Obviously you can over-leverage a property, but there is a balance.  If I can borrow money at 6% and invest money to make 20% plus I would do that all day long.
2) Without leverage you are setting yourself up for paying more taxes because your depreciation expense cannot fully offset the cashflow.  You would be better off having two properties at 50% leverage than one at 0%.
3) You lose out on appreciation benefits by having one property unleveraged when you could have four properties at 75% leveraged
4) Unleveraged properties are a target for ambulance-chasing lawyers and also now fraud.  About 10 episodes ago, BP had a podcast on this topic.  Take a listen. https://www.biggerpockets.com/blog/real-estate-945