Cash Ain’t Always King – It’s About Timing and Strategy

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The saying, cash is king is on my A-List of most used and abused phrases in real estate investing. Knowledge is king, and will trump the use of cash pretty much every time out, given time. Yet, in today’s market, one we’ve dealt with several years now, the phrase is repeated as if merely saying it gives the speaker magic power. A bad investment is bad whether you paid cash or not. A winning strategy used in the wrong set of circumstances will only be exacerbated if it was executed using all cash.

Getting a great price with cash is no great feat. Almost anyone can get that done. Chasing price will almost always cancel out solid strategy, as price alone, contrary to the mob’s insistence, isn’t what gets the job done. The sad thing is, most won’t realize what they’ve done to sabotage their own retirements till it’s too late.

An example would be back in 2007 when I did everything but get down on my knees begging to dissuade folks from buying San Diego property ‘at the market’s bottom’. A couple of ’em did so with the combination of cash and gusto. They’re still not back to ground zero. But even then, it’s the simply crippling results of mistimed strategy that is multiplied negatively when using the cash ‘as king’ approach.

Every month I speak personally with at least a couple investors who are still relatively young, say 50ish, who have wheelbarrows of cash.  They can’t wait to buy as much real estate as possible. For some that would be a superb way to go. For them? It’s like wearing running shoes purposefully two sizes to small for a marathon.

Why do people do that to their own retirements?

I can see the furrowed brows as some read that last question. But think about it in terms of your personal end game — the most retirement income possible. Then think of your available capital as finite. Once that capital is out there workin’ for ya, it’s up to the quality, the execution, and the timing of your chosen strategy to make things happen. If you put $500,000 dollars into that much real estate without debt, what you have today, will be pretty much what you’ll have at retirement. The value and income will, of course, fluctuate with the ebb and flow of the market. However, it won’t change much in say 15 years, when you plan to retire. If you’re still smilin’, good for you.

On the other hand . . .

If that same investor, 15 years from retirement, put an average of 25% down on $2 million of income property, the difference at retirement would be literally lifestyle changing. Instead of $3-4,000 a month and half a million in free and clear equity, he’d be livin’ on $12-16,000 monthly. Ironically, his cash flow, Day 1 — 15 years before retirement would be about the same as his Cash is King buddy’s at retirement. Oh, and his net worth the day he retired? Assuming no appreciation for 15 years,  it would be $2 million vs $500,000.

Again, I ask the question: Why would you buy for all cash that long before retirement? The investors who use leverage prudently and with a plan, will enjoy 2-5 times more income at retirement than those who worship at the alter of King Cash.

Put more succinctly — do you wanna be king now, or when you retire?

Go ahead, take your time, no rush.

About Author

Jeff Brown

Licensed since 1969, broker/owner since 1977. Extensively trained and experienced in tax deferred exchanges, and long term retirement planning.


  1. I think you have completely missed the point when you say that cash is NOT king. Obviously, one should leverage their investment. But, the real point is that SOME cash IS king! The people who are losing their shirts to guru’s these days refuse to believe that SOME cash is generally required for investments. It might not have to be their own money, but someone is generally going to have to through some cash in the pot! The days of going to a lender for a 70% LTV, but with a 100% CLTV are over, for most people. And, the exceptions to my generalization are very very few in the broad scheme of things.

  2. Hello,

    My understanding of the Cash is King statement has always been in reference to cash flow generated from a property. Are you generating a positive cash flow that will keep the banks saying yes to lending you money as your portfolio grows or are you feeding your property every month thus diminishing your ability to qualify for further financing. If you don’t have positive cash flow you can’t grow and that’s why Cash is King.

  3. Mitch Hawkes on

    Jeff talks turkey. The comments seem to be speaking Norwegian.

    This educational article is about cash vs. financing when investing for retirement.

    Do not despair, Jeff. Be assured a few people are getting your clear and urgent message.

  4. “Cash is King” seems like a very broad statement open to many interpretations. I think Olen was trying to say that whether you use cash to pay in full or as a down payment to leverage your investments, that cash is what makes either of those options possible. No money down deals are no longer. Simply, if you don’t have any cash, you can’t invest at all, so in that sense, Cash is King.

    I suppose most people think of all cash transactions when they hear “Cash is King.” Therefore, people buy their property with all cash and no financing and think of that as the best way to allocate their capital because “Cash is King.” Jeff is saying that’s not the best way so “Cash Ain’t Always King.” Am I understanding that right, Jeff?

  5. What Jeff is saying is that with 15 years left before retirement, why not use that time to keep building your money?

    Let’s pretend you have 500K in cash and each investment property is 100K.

    If you just spend your cash, you can get 5 properties and then forever live off of whatever rent you make (minus depreciation, repairs, taxes, etc.). You do outright own the property, so your profit margin is larger than if you were financing them, but keep in mind, you only have 5.

    If you use that same 500K instead to put a 25% down payment on $2 million in property, you now own 20 in this scenario. Your profit margin is smaller due to financing, but you have 4 times as many properties. Not to mention, you can depreciate 4 times more properties and you get a tax break on the interest you paid on them as well. Also, 15 years later you will be halfway (almost) to owning all of the properties. Your equity increased, your cash-flow increased, etc. all with the same amount of money as the first scenario.

    Does that sound about right, Jeff?

    I do understand why people may be confused with this, but read the article and it’s incredibly intelligent. Cash is king when you want to persuade someone to sell for less, but that couldn’t be further from what this article is about.

    Thanks for the great advice Jeff!

    • Justin — Bingo! Buying properties for cash is why Grandpa found himself with two houses plus Social Security at retirement. Meanwhile, the guy across the street did exactly what you used in your comment, and retired with multiples more in income.

      My experience has demonstrated that the ‘buy for cash crowd’ gets flustered when their strategy is shown to be wanting.

      Wanna know when cash is really king to the vast majority of real estate investors? Every first of the month when all their rents start showing up in their mailbox or, better yet, auto-pays into their bank account. Then cash IS king and so are they. 🙂

  6. I read the article and I understand the main point that using leverage prudently at the right time gets you the best returns. I got Jeff’s example the first time. What isn’t clear is the meaning of “Cash is King.” When people say that, does that mean they are referring to deals where 100% of the funds come from cash and there is no financing? If you use your cash and financing to buy multiple properties where the financing alone wouldn’t get you a single property, is your cash not considered “King?”

    It’s just semantics, but I’m curious how people use the expression.

  7. Matthew — You understand. Cash is king generally refers to the ability to buy real estate for cash, especially when financing is difficult or virtually impossible to come by. The problem comes when some attempt to apply that definition when money is cheap, and the concept is third best as a strategy — when investing for retirement.

  8. Kevin Sproul on

    I always thought the “Cash is King” thing only mattered at the time of purchase as a tool for negotiating a better price. Then as soon as you had the property up to rent-able state and occupied, you would refinance the property with a loan larger than your initial investment.

    In other words, Cash is King for the short term, to get in on a good deal, and that deal must be good regardless of whether you pay cash, get a loan or work with investors.

    However in this article Jeff seams to be talking about that other Cash is king method, where you just don’t leverage the property at all. My response is: Why invest in real estate at all if you are not going to leverage it? Most of the benefits of real estate investment derive from your ability to leverage. I.e. It’s leverage that turns a 20% increase in property value into a 100% increase in equity.

  9. Hey Kevin — Right you are, but it goes even further than that.

    Even going your route, which works like a charm when it can be applied, should wind up without debt when cash flow is king, in retirement. What I have many of my clients execute is what I’ve come to call the ‘BawldGuy Domino Strategy’. Once your property is acquired, the cash flow is redirected towards just one property’s loan. If more can be added via their day job, more the better. This results, more often than not, in multiple properties with only 20-30% down, being debt free in just 8-15 years. If your day job is very high pay, it can be done even sooner.

    Again — it’s all about timing.

  10. I am past retirement (62), have my home and a 2 bedroom condo paid for. I am in the process of selling both to move to another state and was wondering about the “paying cash” philosophy at this time in my life. Is it a good idea to pay cash for a home and then to split the profits from the condo (approx. $120,000) to leverage a couple of investment properties? How does my age factor in to this? Thanks for any guidance you can give me.

  11. I know this is an old post, but I hope someone can clarify a few things for me:

    @Mathew comment “Also, 15 years later you will be halfway (almost) to owning all of the properties. Your equity increased, your cash-flow increased, etc. all with the same amount of money as the first scenario.” How is your cash-flow increased? If loan 30 years, your mortgage is still the same, so cash-flow does not increase correct? Unless you talking about increasing rents, but both scenarios increase rents.

    @Jeff Brown “Ironically, his cash flow, Day 1 — 15 years before retirement would be about the same as his Cash is King buddy’s at retirement.” I am not sure I understand this part.

    Assume I have 100k. Assume properties 100k rent for 1k/month. If I buy one property all cash, assuming expenses is only 50%, I get 6k/year.

    If instead I use financing and buy 5 properties (20% down each), gross rent will be 5k/month. Assuming 5% interest rate for 30 years, I got monthly mortgage for 430/month for each. Assuming 50% expenses again, cashflow will be 70/month for each property, 350/month for all properties, or 4.2k/year.

    I am not sure I would say 4.2k/year is similar to 6k/year, but is that what you meant?

  12. Ray — The equity is increased, regardless of any increase in value, due to the accelerated pay down of the property’s debt. The cash flow is radically increased when the loan has been paid in full. No need ever for your NOI to increase a dime, ever.

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