Paying cash vs financing

[Christopher Sellar]

Hello BP family! I am looking to start owning single family rental properties. I am 34, active duty military with a big family. The plan is to buy our next house outright and rent it out when we move. After a few years of renting, because we would pocketing all of the rent which would bring in Hopefully 20-25K per year, we would buy another house outright and eventually rent that out. I understand this is a slower more linear plan to owning multiple properties. My goal is to have 6 fully paid off properties in about 10 years or so. I understand the BRRRR strategy. But this is just more attractive to me and would rather have 4-6 paid off houses than 20 houses that I still owe on. I am open to financing though, but I think I just like the idea of buying one house at a time and paying it off. What would you all consider doing and does this goal seem practical or would it make more sense to finance more homes and leverage the banks as much as possible?

Thank you in advance for your replies!

[Kevin Hunter]

@Christopher Sellar, I love your question and your strategy.  A lot of folks have given great advice so I won't belabor those.  One alternative is to utilize leverage up front and set the balance aside in an account as @JD Martin mentioned, and re-evaluate your position every six-12 months.  If you find yourself in a position where you just aren't comfortable with the debt, pay it off then.  Leverage will not always be as inexpensive as it is right now.  When I started, I got an investment loan for 7% and I was ecstatic. 

Another factor to consider is the length of the plan.  If it is truly a ten-year plan that is one thing. If that is an arbitrary timeline you picked, then take a hard look at it.  Are you ten years into your military career and looking to retire in ten years?  That is a different story.  Just be clear about the why behind the goal and then work to it.

In your OP, you stated you know leverage is an option but you "just like the idea" of paying the props off up front. No one can tell you what is right for you.  Do what is right for you?  Just do it from an informed position.....

Good luck.