paying cash vs financing

[Joshua D Black]

Maybe it's my years of listening to Dave Ramsey, or maybe it's the way the numbers look in my head, but if you have the capitol to pay for a rental property 100%, why would you finance? it seems to me like you are taking unneeded risk for very little reward. plus you are paying more for the property in the long run. like I said, I don't understand. there has to be something I'm missing.

[Zach Robbins]

Josh I struggle with the same question. I just had my offer accepted on my 2nd duplex and will close on it in the next 30 days. I chose to pay cash for my first two units. I'm eventually going to be faced with having to finance if I want to scale but in the beginning, just my opinion, it makes sense to have properties paid off to maximize cash flow. Everyone's situation and strategy is different. In my case I work a W-2 job. My strategy is to get my first 5 units paid off as quick as possible. Then I will begin using financing to minimize capital needed up front. Use the first 5 properties to accelerate paying off the mortgage of unit 6 while I continue to save my W-2 salary to fund the next down payment. As my portfolio grows I may have 4 properties financed. One of those 4 I will pound the principal with the cash flow of the other properties while the remaining 3 financed properties I will only make the minimum payment. The ultimate goal is to get my portfolio to where it can start funding the growth within itself. So for me dumping large amounts of capital in early on makes sense (to me anyway) to minimize risk and accelerate the time until the cash flow is great enough to fund the next deal.