I invest in rental properties personally and for my clients. A key financing consideration is the reliability of cash flow to pay the mortgage loan.

Consistent and Reliable Cash Flow

With multi-family rental properties (or if you have a larger, diversified rental real estate portfolio) you should expect a relatively consistent and reliable cash flow - which suggests getting a mortgage loan and enjoying the benefits of leverage. I recommend properties (or portfolio) with eight or more units.

However if you prefer a single-family property (or have less than four units and/or this is your only property), vacancies and other expenses can quickly limit the properties cash flow and ability to pay the loan. In this situation, I would recommend more cash and less borrowed money.

Understand that leverage is one of the greatest attributes of real estate, but cash flow (whether from the property or other income sources) pays the mortgage loan.