Cash or finance? That is the question

[Neil Hauger]

Ok, really opening a can of worms here but I am interested in some diverse opinions. Basic question: Should I pay cash for properties or get them financed and leverage myself.

Background. I plan to retire professionally in the next 5 years. At least not do my current job. I am 50. Debt free except primary mortgage and a rec property ( i am renting it, 50% of annual debt covered at this time). My personal and investment goals/desires are to be home more time to enjoy life, spend a lot of time with my kids, not worry about meeting debt obligations all the time, excercise etc. Live off of my passive income, sell some RE with my newly acquired license and supplement that with income from Brokerage funds. I am getting a real estate license so will work at that, but realize that those earnings will not likely be a full replacement for my current income. So, cash flow is king for my investments and goals. I have the cash to invest and my thoughts are if I use it, I make immediate cash flow and can cover my annual expenses with approximately two more multi family purchase. I have analyzed a few deals and from what I can tell the cash flow from them combined with what I have now, I am covered 100% if all goes well. Of course, a few vacancies and I can fall short monthly. Hence, I will supplement with my RE sales once I get rolling. That is the plan.

The idea of not having any debt ( not including my primary mortgage ) is attractive to me. I have been working toward that for some time and I am 80K from that point (80K balance on rec property) My investments are all cash flowed very well so I do not include that as my debt even though officially I guess it is.

I have the ability to pay off all my investment properties 100% in the next 1.5 years. I am to receive some stock pay out from my recently acquired Medical Company.

If I boil this all down I guess I come to this. 1. leverage my self and then carry the debt until it is paid off (or maybe never paid off). Or, 2. simply pay cash, bank the cash flow and live off that (plus whatever supplement income I can earn with RE sales). I like the simplicity of the cash deals. The thought of always outsourcing the debt to my tenants is possible but potentially, has no end in sight if I keep following the finance/buy model. I am rambling a bit, but I hope you see the basic issue here. Debt free or financed?