Is it ever wise to buy real estate cash and have no mortgage?

[Stephen Gonzalez]

Is it ever wise to buy real estate cash and have no mortgage?  i thought putting the least amount of down and having leverage is the smarter move?

[Jordan Decuir]

@Stephen Gonzalez The answer to that is probably HIGHLY subjective and dependent upon each person’s individual circumstances and investment objectives. In terms of investment return potential, using less cash for an investment would bring you higher returns on that investment from a percentage standpoint. On the flip-side, now that you have leveeaged that property, you will have that additional fixed monthly debt service (i.e. mortgage payment) that could be seen as increasing your risk in terms of potential for default on the loan and losing a property to foreclosure along with your invested cash in most cases. The other side of that is that the less cash you put down into any single property may decrease your market risk in the event that property values go south because you only have a small amount of capital actually tied up in that one investment, as the lender provides the majority of the capital generally speaking. I would say that for most that are attempting to BUILD wealth, it is the better move to put less cash down on a property to get the leveraged return on investment. For some that are simply looking to protect their wealth, perhaps putting down more cash or funding an entire purchase with their own cash may be more-suitable for that person’s investment objectives. It’s all subjective in my opinion however.