If you’re considering investing in real estate, you may be wondering whether it’s better to buy an investment property with cash or with a mortgage. While buying with cash may offer some benefits, there are also several advantages to buying an investment property with a mortgage.
Leverage
One of the biggest benefits of buying an investment property with a mortgage is leverage. When you purchase a property with cash, you’re limited by the amount of money you have available. With a mortgage, however, you can leverage your investment by borrowing money and using the property as collateral. This allows you to potentially purchase a more expensive property or purchase multiple properties, which can increase your potential return on investment.
Cash Flow
Another advantage of buying an investment property with a mortgage is the potential for positive cash flow. When you purchase a property with cash, you’ll receive all of the rental income, but you won’t have any tax deductions for mortgage interest. When you purchase a property with a mortgage, however, you’ll have tax deductions for mortgage interest, which can reduce your tax liability and increase your overall cash flow.
Diversification
By using a mortgage to purchase an investment property, you can also diversify your investments. If you have a large amount of cash tied up in one property, you’re not able to invest in other opportunities. With a mortgage, however, you can use your cash for other investments while still being able to invest in real estate.
Appreciation
Finally, buying an investment property with a mortgage can also provide the potential for appreciation. Over time, real estate tends to appreciate in value, which can result in significant returns for investors. By using a mortgage, you can benefit from the appreciation of the property while also receiving tax deductions for mortgage interest.
Conclusion
While buying an investment property with cash may offer some benefits, there are also several advantages to purchasing with a mortgage. Leveraging your investment, potentially increasing cash flow, diversifying your portfolio, and benefiting from property appreciation are all benefits of buying an investment property with a mortgage. If you’re considering investing in real estate, it’s important to work with a reputable mortgage lender and real estate agent to ensure that you’re making an informed decision based on your individual circumstances.
