There are more than a few schools of thought when real estate investing for retirement is the subject. Most investors, at one time or another become loyal to at least one of ’em.

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Transcript:   Man, you want to start an argument? Go into any place where there’s more two investors and say “This particular school of thought for long-term investment is by far the best, and the rest are just followed by idiots.” Man, you’re going to be there all night. There’s the super old school guy that’s never adopted to new economic times who says “If you don’t pay cash … Real estate’s just like cars. You don’t borrow money ever. That’s just not the way it’s supposed to go.” Then there’s the guy that says, on the opposite end, “I just don’t understand using any of my own money ever. The idea is use other people’s money. That’s it. That’s the ticket: OPM.” That’s super extreme. I’ve had many people come to me saying they want me to advise them but they want to use zero down loans, back when you could do it, and I refused. Literally without exception every single person came back to me within one to three years later so I could dig out my magic wand, which I’ve never owned, to fix the problems that came. Zero down doesn’t work unless it means you’re not using any of your money. You are putting down payment but it’s other people’s money. That I get. Then there’s the people that say “You never ever end up with a free and clear property because it’s a sin to waste low interest, especially historically low interest.” They get upset at the very idea of having the equity in your property vs. in the bank. I get that. Stand-alone, I’m not going to argue that principle. That comes from an author named Andrews who I like very much who wrote I think the name of the book was Fortune 101, but the idea is this: Nothing is in a vacuum. What sounds good in and of itself stand-alone, when you put it in a room full of other factors it doesn’t work. That includes things that I tell people to do. If you subtract the factors that it took for me to get to that decision and to give that advice I maybe wouldn’t have said it. What you have to understand is, a school of thought for investment if you come from my school of thought, is long term if you have the capital, if you have the ability to save, and you’re going to have a 20 to 40-year timeline, you’re buying investment real estate. You’re generally putting reasonable down payment. Now I’m not going to talk about leverage here today, but leverage in this sense is the traditional cultural definition of down payment, which is by the way, not – read my lips, n-o-t – not the real definition of leverage. Today we’ll use down payment amount. At 20 to 30% down when you buy a property you’re not at the extreme of 0 down vs. buying for all cash. You’re just using what I would call prudent leverage. Now the word prudent is subjective and relative at the very least, but if the interest rates are historically low like today, 20 to 30% is fine and will generally speaking give you cash flow somewhere between four and five on the low side, cash on cash 4 and 5% up into double digits. It depends where you’re buying and what your agenda is. The difference, though, is if you have enough to pay cash for a $300,000 residential income property, that means if you were to put 25% down on that, which is $75,000, and let’s say it cost you $85,000 to close it, that $300,000 will allow you to buy three properties with prudent leverage. If you do that over time and get those properties free and clear you end up with three times the ca...