Posted by Tom on November 20, 2000 at 09:53:21:
Charles, you can always use CASH, you have to look at the return. Depending on your other income I would look at buying a couple of units and increase your cash flow. (that really depends on if you want to be a landlord) The important thing here is: “DO YOUR RESEARCH” know what your return will be. Beleive me, it much easier to deal with the cash in your pocket.
Buy w/ cash - Posted by Charles
Posted by Charles on November 20, 2000 at 08:37:33:
I’m new to the game of REI so I beg your indulgence if this sounds like a stupid question. I am looking at a windfall of cash in the near future that if I wanted to, I could purchase a typical two unit rental property in my area with all cash. I would likely live in the one apartment and rent out the other. Is it advisable to use this cash to pay for the rental property entirely so that I do not have to get a mortgage?
I was figuring that the home would then have all the equity built up in it and therefore when I sold, the money would be all mine. Any rent money I collect should more than offset taxes and upkeep with some left over to invest in other vehicles (perhaps more real estate). It seems logical to me but after monitoring these boards, it seems that the more experienced investors let someone else’s money pay for the property. Would it then be better to use the money to put down payments on multiple properties?
I have not found anything written about this yet , but if there is, if anyone could point me in the right direction, I’d appreciate it very much.
Thank you,
Charles
Re: Buy w/ cash - Posted by Brent_IL
Posted by Brent_IL on November 20, 2000 at 16:26:37:
You’re missing the leverage part of the I.D.E.A.L. investment. Use a financial calculator to understand the effect of different sized loans with various interest rates on your rate of return. Balance that with your personal risk tolerance so you can sleep at night. Recall that with a one-time shot of money, when it’s gone, it’s gone.
CASH is king… - Posted by David Krulac
Posted by David Krulac on November 20, 2000 at 16:11:39:
agree with Millie, save the cash, you can always use it. Buy the property with an owner occupied mortgage and let the tennats pay for the mortgage. Whether you buy four more investments or not conserve your cash, as cash is accepted everywhere, even where American Express AND Visa are not.
Re: Buy w/ cash - Posted by Quinton
Posted by Quinton on November 20, 2000 at 16:01:34:
Charles,
I like the idea of you using a little of your money to buy a duplex/fourplex and then rent out the other units to pay off the mortgage that you can get from just about anywhere. You have more than enough for any loan program downpayment and why not let others help you out with the mortgage?!
With the rest of the money, you could be a lender to other investors that have a good to great track record of investing, who might not want to use traditional banks for their loans… you can make great money this way too!
Keep posting and asking questions on this site…PLENTY of people would love to help you out with your extra money to make more!!
Re: Tip from a Buy w/ cash professional investor - Posted by Millie I.
Posted by Millie I. on November 20, 2000 at 12:27:17:
Charles,
How you go about it depends on whether you want to be an INVESTOR or just a HOMEOWNER.
CASH IS POWER only if you invest it wisely. If you have a lumpsum coming in, unless you get that regularly, I recommend that you have a goal for financial growth and well thought out plans to accomplish it. You can have a single agenda, put all your eggs in one basket, and maybe earn a few bucks when you sell; or you can diversify in a more dynamic strategy, spread your money in several sound investments, and with good planning, dedication, and determination, build a financial fortress for your family.
BUYING WITH CASH is profitable if:
1)You are buying way below market value (60% or below) where the profit is secured going into the deal.
2)You are competing for an attractive deal where a guaranteed cash offer may sway the seller’s decision in your favor. (eg. REO from banks at wholesale price )
3) A motivated seller needs cash NOW to move, and is willing to sell you the property for a whole lot less.
A DYNAMIC APPROACH:
If you have a bag of seeds, you can make soup and feed your family for one meal, or you can grow a plantation and secure your family’s financial future. If you have $250K, you can buy one nice house with cash and have a peace of mind that it is paid for, or you can use it as a downpayment for FIVE 4-unit rental properties, and have 20 tenants paying your mortgages and expenses, and with some dedication on your part, a nice monthly profit for the next 30 years. You can sell them for a big profit when you retire, or you can refinance them in a few years when the property values go up, take your downpayments back out and buy another 5 rental properties. Now you have 40 tenants supporting your family. At that point you could even quit your job and be a full time landlord/investor.
Owner-Occupied-Buyers gets the Best Loans:
When you buy a house to live in (could be 1 to 4 units), unless you are already retired and don’t want to deal with mortgage payments, or you have so much money you don’t know what to do, you should always take advantage of the many government or lending institution programs out there that offer owner-occupiied-buyers the best terms (zero/low down-payment, low interest, low payments, etc. that are not accessible to non-owner-occupied buyers ). This could even be an investment property as long as you live in it .
WHAT MAKES YOU RICH is not how much cash you have, but what you do with it. Money tends to disappear very quickly when you have no plan to grow a MONEY TREE.
THINK AND GROW RICH !
Best of Luck,
Millie I.