How do you use debt properly to leverage?

[Ethan S.]

How much is too much leverage? What's a smart approach to using debt in a positive way and not negative. I'm completely debt free and looking at purchasing my first rental property. Trying to figure out how much debt I can handle based on my budget. Any advice??

[Lynn McGeein]

It's based on your comfort level.   More risk can mean more reward, but we prefer more stability.  We've mostly used 20% - 25% down payments on 30-year fixed to lock in low rates for 30 years, but this limits our purchase power.   We've discussed using other financing, cash-out refinances, hard money lenders, etc., but just can't bring ourselves to give the lenders all that money as the additional costs and higher rates involved in those types of loans makes the numbers seem worse, and stocks have been a better alternative for us recently than taking out expensive loans for more real estate.  Having a larger emergency fund may be the key as you can take on more risk if you know you have 6 months of payments sitting there if you need it.