Leveraging...Right in All Circumstances?

[Ezra Lavinsky]

I have a rather broad question. I had a conversation recently regarding buy and hold, single family, rental strategies. The individual I was speaking with was adamant  that one should always leverage as much as possible, with loan terms of no less than 30 years, regardless of one’s circumstances.

My question is this; I understand the benefits of leveraging and the exponential growth potential. However, depending on one's individual financial circumstances and needs, aren’t their times when its in the investor’s best interest to use 15 year mortgages, leverage less, and even buy properties outright? It hard for me to believe there is a one size fits all investment strategy as this individual was implying. 

For example, I am considering buying 4 condos outright for about $100, 000 each. These condos typically fetch about $925 per month in rent and have a history of steady appreciation. I want to buy them outright because right now I need cash flow greater than what I would receive if I was still paying down the mortgages. Additionally, at the moment my credit isn’t great and don’t know how interested banks would be in lending to me right now. In the future, when I need less immediate income and my credit improves, I plan on buying more properties and taking advantage of leverage. I would greatly appreciate any feedback regarding these ideas. Thanks very much.