New Member Intro from Mishawaka, Indiana!

[Andrew Sime]

Hello all,

I am a new member from Northern Indiana getting into buy and hold investing in pursuit of financial freedom.  I am a 3+ year student of real estate and just finished my first rehab to rent.  I purchased a 2 bed 1 bath foreclosure on August 19th and just signed my first lease with a new tenant last night after rehabbing the property.  Excited to be in the game!

I would like to scale this business as I put systems in place for each step of my process.  A big question I have is whether or not I want to use leverage and grow my portfolio more quickly or continue using cash and ensure a nice cashflow (projecting right around $400 per month from this property which I paid for with cash).  My model for this market right now is to buy it right, between $24k and $33k and put $3-7k into the property to gain some initial additional equity (Property would sell for at least $50k maybe close to $60k, I have $33k in it)  Rents are in the $650-800 range (700 on my current 2 bedroom).  So an all cash purchase + rehab at $35k should generate a net cashflow of $5,270 after all expenses including taxes.  This makes the cash on cash return 15-16%.       OR      If I were to use leverage and put say $10k down on a house that will cost $35k after all repairs with a mortgage payment of approx. $200/month will take my cashflow to around $2,870 per year and a cash on cash return of 29%.

Looks like it is an obvious choice with these numbers to utilize leverage but I am conservative (paid cash for my home and first investment property) and looking for advice and encouragement to get over my gut telling me that debt is bad...

-Any all cash investors out there that can say why it's better to only do cash deals?

-Any other investors using leverage with some advice or encouragement on using leverage?

-Also, will traditional lenders loan only $25k?  One I spoke to during due diligence said the minimum they would loan is $40k meaning the property would have to have a purchase price of $50k (20% down) to use them.

Sorry for being so long-winded, looking forward to continuing to learn and grow in real estate!

AJ