Better To Pay Cash or Finance?

[Roderick Giles]

Can someone please help me to understand the pros and cons. Buy a home for $55k cash that cash flows or finance 2 homes for $110k total that cash flows and pay the $30k 20% down payment?

[Craig Jeppesen]

It is all about risk and returns. You have less risk if you pay cash as there is no loan. The bank can’t foreclose on you because you own the property. However, you can get a higher return, and more opportunities if you leverage and buy multiple properties. Leverage can also help you scale and grow your portfolio quicker than saving and paying cash for each property. You just don’t want to over leverage where if you have a financial issue it would cause you to not make a payment and you could lose a property. It is less stressful to have a paid off property and you will want to get there eventually even if you borrow for a while to build your portfolio. There is no right answer, it is a personal choice based on your goals and risk tolerance.