My DH and I are beginning to look into the option of investing in a rental property. We are thinking of buying a property in our town for in the region of $75-100k, which would give us $800-$1200 per month in rent. In theory, we could buy this outright, as we have around $175k in cash savings. We also, however, owe $390k on our own home, which is worth around $700k, so want to keep some money as backup ( prob in stocks to diversify?) in case DH loses his job/disaster strikes.
We would be eligible to take out a second mortgage for the rental based on DH's salary.
My question is: would it be sound investment strategy to buy the house/apartment outright? Or is that just crazy? Should we take out a mortgage so we have more cash at the ready? How much do you typically put down as a downpayment? If you were us, would you be putting down payments on two or three properties, to maximize potential gain (for instance, we could buy two $100k rentals with $50k down on each). I know these are basic questions, but I'd really appreciate some opinions and to know how others would approach this.
Thank you.