Any All Cash investors out there? Buy and Hold

[Andrew Sime]

I am shocked to see how few members prefer investing with cash only, no leverage. 

My current strategy is to buy a house or 2 each year for the next 7 years all cash. This should position my family to cover all of our expenses. At that time we could do whatever we want for work and I have considered using leverage at that point to build a big real estate business with the cashflow safety net in place. My wife and I both work and we are conservative with money (obviously). All cash I am getting about 14-15% cash on cash return after all expenses. I understand that I could get about 25% COC if I used leverage but with our full-time jobs I would rather sleep well, build slower, and have less doors to manage.

Am I shooting myself in the foot for passing up the extra 10% return for piece of mind and less to manage?

[Raj Gandhi]

Interesting question.  Let's (over) simplify your situation, calling it $500k to invest, for 10 years.  Scenario 1 is 10% and Scenario 2 is 20% (I think your original numbers are too optimistic).  After 10 years,

Scenario 1 = $1.3M

Scenario 2 = $3.1M

The difference is $1.8M or $492 per day spread over 10 years.  Would knowing you're better off by $492 per day help you sleep at night?  Personal preference.

A real issue missing from your analysis is inflation.  If inflation increases then fixed debts decrease in ~value.  I personally believe that we're at historic lows for inflation rate.  Therefore, I'm accumulating (historically) low interest fixed debt with long (30y) terms.  If inflation stays the same then fine.  If inflation increases then my rents increase but my debt service does not.  Ultimately, I like using real asset debt as an inflation hedge.