All cash or financing?!?

[Daniel Lehman]

Hello, I am a new member to BP and currently saving up to invest in real estate with my cousin as a partner (also currently working on getting my real estate license). We decided on renting out small multi-families to start and working our way up to getting apartment buildings with the occasional fix and flip. We plan on financing our properties with mortgages and finding a local portfolio lender. 

My question is this - once we are in a position to do so, should we switch to purchasing our properties with all cash, or is financing a better way to go? I understand there are leverage benefits to financing but I would like more feedback on which is the better way to go. 

Thanks for any and all replies!!

[Mike F.]

All my rentals are free and clear now, this is what calculates to net worth. I'm not in the business of continuing to acquire every rental available, we are extremely picky about what we purchase and why. Net worth is all that matters, that's a result of equity through appreciation, sweat equity, smart purchasing, pay down of debt. Cash flow helps through pay down of dept or purchase of more properties. Leverage means nothing if you're not creating equity and net worth, leverage that only creates more dept is meaningless. Again, show me anybody who believes too much in leverage and I'll show you twenty more who went BK in the last recession and as those lessens are forgotten show me those who again believe too much in leverage and we will see them and and more BK'd in the recession that will eventually come. Keep in mind in the next recession all that equity we have I'm talking about can be tapped and 'leveraged' by buying all those really leveraged investors properties at a big discount, just like was done in 2009-2011. This is a long game not a short one. If the cyclical nature of real estate isn't in your game plan you're not realistic in how this works and have way to short of an investment window. Which is why so many went belly up in the last recession, those were all the people who think this is a sprint to leverage yourself as fast as possible into as many properties as you can chasing cash flow and 'control' of properties, cash flow can be a very precarious thing in a down turn, like trying to cup mist in your hands.