How to Maximize Rent Vs Mortgage Payment Spread

[Saurabh Arora]

Hi Everyone,

I'm a young professional who's saved up $50,000 and would like to start investing in rental real estate. I want to utilize as much leverage as possible so I am assuming a 20% down payment for a property. I'd like to know how to go about finding property where I can maximize the profit between what I would get on rent for the property vs what I would pay for the mortgage. Are there certain attributes of a house that maximize this profit? Are there certain cities which are better for this?

Thanks,

Saurabh

[Wendell De Guzman]

If you want to use as much leverage as possible, then one strategy is buying a 4-flat as "owner occupied" housing - you live in one of the units and you rent the other 3 units. If you do this, the downpayment you need is as little as 5%. That will maximize leverage since 95% is financed. This strategy is part of what @Brandon Turner refers to as "House Hacking". He wrote a good book - "The Book on Buying Houses with Little to No Money Down" and he has a good chapter on House Hacking.