Weird Strategy for High Income individuals

[Simon A.]

Hi guys,

I would like to ask about your opinions and views about the following strategy.

Let us assume that I am a high income individual with full time job and I want to invest in Manhattan where prices are just ridiculous. I want to buy a 2 bedroom apartment which costs 700k$ and rent it out for 3k$ per month. It is as far away from the 2% rule as you can get.

However, what if I put down 210k$ and take a mortgage for the rest ? The property should cash flow and I use the leverage a little bit.

The question is : Do you think that this is ''safe'' way to invest in RE for High - Income individuals ?

Thank you for your views.

Simon

[Dawn Anastasi]

It doesn't matter if you are a high income individual.  Anyone who can get leverage can use it.

But, the cost of the property is still $700,000 whether you take a loan on it or put down cash for it.  On an investment property you're going to need to put down 20% anyway and on $700,000 place, you're going to have to put down $140,000 at a minimum.  

In some markets, if you have $210,000 cash you can get much more than $3,000 in gross income and you don't have to spend the whole $700,000.

The only reason to buy in a place like Manhattan is that you buy that $700,000 place for $500,000 and expect that $700,000 place to be worth a million dollars in a few years.