The decision on whether to pay cash for income property or to use the cash as a down payment rests on a lot of factors such as your tax situation, whether you want immediate income or future appreciation, or your aversion to risk. Investing in real estate is actually two incomes: rents and future appreciation of your equity.
Assume, as other have, that you can buy Property A for $200,00 cash or finance Property B for $600,000 with a $200,000 downpayment. What is the income and expenses of the property? Supposedly, Property B would have a higher income, but also a higher expense for a mortgage. You should calculate the case flows in each situation. If each property goes up in value by 10%, you'll make $20,000 on Property A for a 10% return. However, for Property B, you'll make a $60,000 profit for a 30% return.
May 11, 2015