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Old 09-10-2010, 04:54 PM
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ILG ILG is offline
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Join Date: Apr 2007
Location: Wisconsin
Posts: 11,465
Re: Personal Responsibility

Originally Posted by crakjak View Post
What you are not factoring into this scenario, is the risk of a 100K mortgage, in the event that you lose your job, and your tenants lose their jobs and move out. If the property is debt free, you have time to get more tenants, even if you have to miss several months of the rental income. Debt-free is ideally better. Yes, you may leverage debt to increase income, but you also increase your risk.
Of course there is risk. However, you can increase your cashflow by using good debt verses paying everything off. If you have $20,000 to put down, and need $20,000 to put down on another property, the chances of you being able to raise that much capitol verses having to pay off your first income property and then raising that much capitol, are much greater. So, which is the greater risk? Having to pay off all your income property mortgage before you invest again? Or investing early and often, carrying more mortgages but having more cash flow? The risk level is in the viewpoint of the borrower. It may be riskier to have a job that you can get laid off of at any given moment than have a lot of good debt.
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