San, that's sound advice. Leverage greatly improves your Cash on cash returns which is why it's recommended, but it also bears the most risk.
For instance if a $100k property throws off $2k/year net income and you put down $10k cash to secure the loan to buy it. Your CASH ON CASH is 20% ($2k/$10k). However if you plopped out $100k cash to buy it your Cash on Cash return is a mere 2%. This is why leverage is preached over and over. You can get better returns on your cash available to invest.
I think somewhere closer to the middle is where I'll feel most comfortable. Fully leveraged and a few months of vacancies really begin to hurt and your options for exiting the property in a hurry really fall. Partially leveraged (40-50%) and you've got more options and lower debt service burden. I'm willing to trade that for a smaller Cash on Cash return.
Another thing to consider, when you're leveraged you make money from 3 sources: 1. Net cashflow 2. Principal paydown (from tenants) and 3. property appreciation (hopefully).
If you're free and clear, you make money from 2 sources: net cashflow and property appreciation. You could argue that your cashflow is higher, but the thing to remember is you paid down the principal initially (buy paying cash), thus lowering your returns.
F - 7/31/14 - PASSED
A - 8/30/14 - PASSED
R - 2/12/14 - PASSED
B - 11/30/14 - PASSED
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