Hi Chopec,You're certainly in an incredibly favorable position... good for you!Which way you go should be determined by your confidence in which way you can get the most productivity from your capital. I.e., can you direct your capital to earn more money than the costs if you put it in real estate, or other instruments (stocks, bonds, mutual funds, pokemon cards, whatever.)First thing is to figure out the costs of your capital. If you buy r/e outright, your capital is only burdoned be relative inflation. Will your real estate appreciation beat inflation? Do you have other investing skills that could beat the appreciation of the real estate?If you take a portion of your purchase out in a mortgage, you will be paying interest as a burdon on capital (in addition to inflation.) In order to figure the real interest burdon, take the loan's interest rate, and discount it by the percentage of your tax rate (for the effective interest after your mortgage interest deductions.) I.e. if the interest was 7%, and you are at the 28% tax rate, discount 7% by 28%, for an effective interest burdon of 5.04%Now... can you beat the costs of capital of 5.04% by some other kind of investment (keeping the investment's tax treatments in mind.)Most folks on these boards feel they can easily do so with patience and diligence. Others disagree, and believe you should avoid any debt, regardless if it's less costly than the returns your capital can relatively safely generate.Which way you go will be determined by your personal beliefs about investments, money, safety and risk. IOW, your financial constitution.I realize this isn't offering you much "follow the numbers" advice. Rather, I hope you see the importance of self-analyzing the overall picture to determine how you want to play.All the best,Dave DonhoffLic. Mortgage Broker (and financial pop shrink!)
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