Help settle marital dispute: pay cash or finance

[Savannah Gates]

Hi,

My husband and I disagree on this point, so thought I would get some other (hopefully, and more likely), educated opinions. A little bit of background: Through some hard work and a strong market, we are walking away with $150k cash from our primary residence home sale after 2 years living here. Other than accidentally flipping our homes (our first home 4 years ago had great returns as well), we are not real estate investors and have no experience.

However, we want to be as smart as we can possibly be with $150,000 in tax free cash. Enter real estate investing. We are moving to an area where the average move-in ready multi family is $150k or less. We plan on owner occupying the MFP until we find a long term home in our new area. From there, we are giving ourselves a couple years to purchase a third home - our second investment property, so on and so forth. 

With that in mind, the question is this: 

Should we buy our temporary owner occupied multi family (still buy and hold though) with cash (that’s a lot of eggs in one basket, but also not ALL of our eggs) OR use traditional financing to purchase with 20% down (and keep even more eggs in the already fullish egg basket)? 

Both have advantages and disadvantages, but is there one option that has a greater advantage in our particular situation? Or is it really just personal opinion and goals? 

Thank you in advance and I look forward to hopefully settling this marital dispute in short order! 

[Alan Pederson]

I like using the bank's money instead of my own when buying rentals. I'm sure you will get lots of responses about the pro's and con's on both sides of this argument.

Paying cash allows you to make more money per month and you don't have to worry about financing or the economy going down and how that might effect your investment.

Financing allows you to keep more of your own money but you're taking more risk. You won't make as much money per month on the rental but you do have the money to buy more then one rental. If the market keeps going up, you realize growth on 2 or more units at the same time.

Like I said, some people like the feeling of paying cash and not having the added stress of financing. For me, I can grow my portfolio faster by financing and taking more risk. Once I get to where I want to me, I will start working on paying off the properties early. It's not a marital issue! My wife was totally against us buying rental property to start with but I was the one that worked my rear off to save a ton of money. Once I finally convinced her to let me buy the first rental, she told me I was on my own. It has worked out really well and she doesn't get involved in financial matters because I manage things really good. I talk to her about things and show her all the numbers but she really doesn't want to get involved other then knowing when she can retire or how much she can spend when she plans our vacations.