All Cash or Leverage on First Rental

[Joel Culler]

Hi Everyone,

Like many others I am new to this form of investing. In the past I have focused on dividend stock, primarily REITs, but would like to move in the realm of real estate investments. I have around 100k that I can invest of my own money and I live in a relatively small town with properties values averaging 90k to 200k, though the price range of 125k to 150k would be the majority of homes in town. I have come across a few listings that needs some work, are listed under 50k, and the comps surrounding them to be at or above the 125k mark. To look at one specifically: 3 bed 2 bath needing average rehab that is listed at 44k. My thoughts were to purchase with cash, use 35k for repairs ( or less if possible of course), and then rent at 700/mo. After the repairs I am hoping the value to be around 120k. I planned to wait about a year to do a refinance and pull 70k back out, leaving roughly 15k of my own money in with roughly  50k in equity. Is there a better way to do this for my first property?