Are you saying big time investors don’t leverage? I would think they’d leverage just as much as small time investors, since they can buy even more properties. Do I have a wrong assumption here? Here’s one example of a SFR in MM. In 1996 (around the bottom of the last down turn), I know someone who bought a 3/2 1500 sq-ft house in MM for $165k. Rent for such place was around $1200/month. That’s ~135x rent multiple. Mortgage was ~$970/month w/ 8% interest rate & 20% down. That means this person is paying 19% less than rent. Fast forward to earlier this year. Such place was going for around $325k and rent was around $1700/month. That’s 190x rent multiple. However, their mortgage would be ~$1350/month w/ 4.75% & 20% down. That mean this person is paying ~20% less than rent. So, if one is to leverage to to get a rental property, rates play a huge deal. 135x rent multiple @ 8% is equivalent to 190x rent multiple when rate is around 4.75%. I totally agree with you that if you go in all cash, it’s a whole different ball game. One other factor I haven’t consider in these equation is the interest rate of a liquid account. In a high interest rate/low price environment, you would also have a very high interest rate for a liquid account too.
