Leverage or not?

[Adam B.]

If my intentions are to buy and hold, and I have $50k to invest would you seasoned investors pay cash for 1 sfh or use leverage and buy 3-4? If you do prefer using leverage, is there a certain % of equity you like to stay within?

Thanks for the input.

[Robert Steele]

Leverage. But not to excess. There is no magic loan to value number. Base it on what cash flow you feel comfortable with. For instance I would not take $100K and buy 10 rentals that each flowed $100 as that is not enough of a buffer. I would be more comfortable taking that $100K and buying 4 rentals that each flowed $300.

Two other benefits of leverage.

Appreciation. If I invest $10K in $100K property and prices go up 3% in 1 year then I make 30% ROI not 3%. Granted this is a double edged sword.

Inflation. By the time I am 15 years into a 30 year mortgage the dollars I am paying the mortgage back with are probably going to be worth half of what they were when I borrowed the money.