Chandler, AZ · Member since 2013 · 4 posts · 0 votes
Hi,
In the last year here in AZ my in-laws have bought 3 SFR for cash. They are retired and do not have any expenses other than health insurance, food, fuel, etc... They are in the hunt for another property. Question, would it be better to buy one home for cash or finance and buy multiple?
Originally posted by Originally posted by Tim Marion:
Thank you for responses. To buy and hold for rental income. They were told by a real estate agent that they would only be able to secure financing after having rental income for 2 years. Is that true?
No, it's not true, and just illustrates why I despise 90% of real estate agents. Most of them are as worthless as tits on a chicken, but boy do they know how to talk out of their arse! Will said it best. Having a license really doesn't mean much, except that the person passed a test that you'd have to be a moron to flunk.
Just to add a little more information...
It probably IS true that they wouldn't qualify for conventional financing, as it sounds like they are retired and probably don't have much income. Conventional lenders generally don't care what your net worth is if you don't have income, so the cash sitting in the bank isn't going to help their loan approval.
Now, that said, there are other types of loans besides conventional. Many small and commercial banks lend their own money and make their own underwriting rules. These are called portfolio loans, and many portfolio lenders will provide financing without significant income, if the borrowers can show decent cash reserves, have good cash flow from the properties and/or can use other real estate to collateralize the loan.
As for whether it's better to leverage or pay cash, everyone has their opinion, but other people's opinions shouldn't matter. They need to determine their goals and investing horizon and make their own decision. I'm a fan of leverage, but I would never say that not using leverage is wrong for someone else.
The benefits of financing include the mortgage interest deduction, leveraging, maintaining capital for unexpected expenses, or for additional investments. Interest rates are at historic lows and property values in AZ look like they have nowhere to go but up.
I would say it makes sense to cashout refinance the paid off properties if possible.
A lot of people seem to think it's best to have things totally paid off but if you can make a higher return on the money than you are paying in interest..it makes sense to leverage. Also with interest at or near historic lows this makes even more sense.
One of the many advantages to Re investing is the ability to apply leverage. Apply it responsibly and watch your returns go up. Over leverage and look out!
Or just cry and say it was the mean old banks that made you do it (buy that property you knew you couldn't afford) and file bankruptcy and/or do a short sale. Just kidding!
Thank you for responses. To buy and hold for rental income. They were told by a real estate agent that they would only be able to secure financing after having rental income for 2 years. Is that true? You would think with three home paid off and cash that they wouldn't have a problem.
Age might be a factor as older people might not want the hassle of managing debt. Its might be easier to manage 3 paid for, then a bunch with debt and less cash flow per property and possible stress.
The current rates so low its really hard to argue 4% and 5% money. Do they plan to hold long?
A longer exit strategy it would seem having your hands on Cheap 4% money could be powerful especially if rates of interest go up. It make's it possible to sell them and stay in the deal and create notes. Who know Im just trying to think here.
Even though I dont like debt I know I do like cheap interest money.
Seems to me interest rates can only go in one direction.
When we say, "Hold long...", define long? Without knowing their plans, I would say at least 5 years. They got into RE investing/rental property because their money was just sitting in the bank.
Thank you for responses. To buy and hold for rental income. They were told by a real estate agent that they would only be able to secure financing after having rental income for 2 years. Is that true? You would think with three home paid off and cash that they wouldn't have a problem.
Not true and one of many reasons not to take advice from someone who does not know what they are talking about. Having a RE sales license does not make you a loan expert, a RE investor expert, or even a RE sales expert.
Thank you for responses. To buy and hold for rental income. They were told by a real estate agent that they would only be able to secure financing after having rental income for 2 years. Is that true?
No, it's not true, and just illustrates why I despise 90% of real estate agents. Most of them are as worthless as tits on a chicken, but boy do they know how to talk out of their arse! Will said it best. Having a license really doesn't mean much, except that the person passed a test that you'd have to be a moron to flunk.
Originally posted by Originally posted by Tim Marion:
Thank you for responses. To buy and hold for rental income. They were told by a real estate agent that they would only be able to secure financing after having rental income for 2 years. Is that true?
No, it's not true, and just illustrates why I despise 90% of real estate agents. Most of them are as worthless as tits on a chicken, but boy do they know how to talk out of their arse! Will said it best. Having a license really doesn't mean much, except that the person passed a test that you'd have to be a moron to flunk.
Just to add a little more information...
It probably IS true that they wouldn't qualify for conventional financing, as it sounds like they are retired and probably don't have much income. Conventional lenders generally don't care what your net worth is if you don't have income, so the cash sitting in the bank isn't going to help their loan approval.
Now, that said, there are other types of loans besides conventional. Many small and commercial banks lend their own money and make their own underwriting rules. These are called portfolio loans, and many portfolio lenders will provide financing without significant income, if the borrowers can show decent cash reserves, have good cash flow from the properties and/or can use other real estate to collateralize the loan.
As for whether it's better to leverage or pay cash, everyone has their opinion, but other people's opinions shouldn't matter. They need to determine their goals and investing horizon and make their own decision. I'm a fan of leverage, but I would never say that not using leverage is wrong for someone else.
Great advice from everyone - humorous too! There is a RE agent that live in my neighborhood that comes by my home every couple of weeks informing me that she has a cash buyer for my home and if I wanted to sell. I asked her if she had any other listings in the neighborhood and she does not. I am sure if I told her I wanted to sell that all of sudden there wouldn't be a buyer any longer.
By the way, I'v been reading the site for the last few days and have learned a lot, especially since I don't know very much to begin with. Guess I need to start saving my money -or borrow some from the Bank of My In-Laws! ;-)