Questions about buying RE with all cash
Investor · Indianapolis, IN · Member since 2023 · 6 posts · 6 votes
Questions about buying RE with all cash
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
3yQuote from @Zachary Bush:
Why are you employing an all-cash strategy?
Read a few books on real estate investing to learn the power of leverage. I like the Unofficial Guide to Real Estate Investing. Here's a very basic explanation to get your juices flowing:
Assume a house costs $200,000 and rents for $1,500. The market appreciates 3% per year.
Pay cash for one house and rent it for $1,500. After five years you'll have earned $90,000 in rent income and gained $34,000 in appreciation.
Buy four houses with $50,000 down on each. Mortgage payment is $1,000 on each house, so you're essentially earning $500 per house or $2,000 a month. After five years you'll have earned $120,000 in rent income and gained $136,000 in appreciation. You've earned $132,000 more by splitting your money and leveraging it.
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197 Replies
- 3yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
When you buy RE, your ONLY cost is the cash that comes out of your pocket. that means if you pay a 20% DP on a $100k property, your total cost to you as the investor, is $20k. If you paid all cash, it would be $100k
Now, the primary role of cash flow is to recover your cost. That means, if your pay only $20k, it will take you far less time to recover your cost. Why is this important? You don't start making a profit until after you recover ALL of your cost.
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes3y
Quote from @Zachary Bush:
Why are you employing an all-cash strategy?
Read a few books on real estate investing to learn the power of leverage. I like the Unofficial Guide to Real Estate Investing. Here's a very basic explanation to get your juices flowing:
Assume a house costs $200,000 and rents for $1,500. The market appreciates 3% per year.
Pay cash for one house and rent it for $1,500. After five years you'll have earned $90,000 in rent income and gained $34,000 in appreciation.
Buy four houses with $50,000 down on each. Mortgage payment is $1,000 on each house, so you're essentially earning $500 per house or $2,000 a month. After five years you'll have earned $120,000 in rent income and gained $136,000 in appreciation. You've earned $132,000 more by splitting your money and leveraging it.
The DIY Landlord Book4.7248 Reviews - Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes3y
There are plenty of people here who either paid all cash for their properties or have paid their loans off and now own those properties free and clear.
No names come to mind but I know they're out there, I recall some members talking about paid off properties.
I generally use leverage myself but I've done a couple of flips all cash as well so I might be able to weigh in.
What are your questions?
- 3yPam BrownBusiness MemberReal Estate Agent · Indianapolis IN · Member since 2022 · 144 posts · 65 votes
Cash is King right now in Indy with the current market conditions. Two of my sellers took lesser offers because they didn't want to deal with buyer financing. Cash and a quick close got the deal done in these instances. I realize what people are saying about leverage---but just saying---sometimes cash is where it's at to get an offer accepted first.
PMI Indianapolis Realty and Property Management4.5664 Reviews - 3yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votesGetting an offer accepted isn't anywhere near as important as making money as an investor. Getting an offer accepted is the mentality of a home owner buying. The goal isn't to get "an" offer accepted, it's to get "your" offer accepted. If your offer isn't accepted, then move on.
Quote from @Pam Brown:
Cash is King right now in Indy with the current market conditions. Two of my sellers took lesser offers because they didn't want to deal with buyer financing. Cash and a quick close got the deal done in these instances. I realize what people are saying about leverage---but just saying---sometimes cash is where it's at to get an offer accepted first.
Buying cash is always more expensive than buying with leverage since the only cost to a REI is the cash they spend. If you pay all cash, you are paying full price. If you use leverage, you are only paying the down payment,...and the rest of the total cost is being paid for by the tenant's rent money. - Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
Why are you looking for an investor buying all cash? That is likely the least sophisticated investor you will meet.
- Investor · Vermont and New York · Member since 2023 · 308 posts · 309 votes3y
What questions do you have about buying with cash? I did 4 deals last year with partners that were all cash.
I am also curious about why some folks are trying to convince the OP not to buy all cash. Strange.
In any event, BUYING all cash can be a powerful way to get into more and better deals. After the property is closed you can refi, and re-deploy the cash for other deals. Buying all cash give A LOT of weight to offers - and allows shorter closing times, lower price and essentially puts you on sellers' and realtors' speed dial for deals.
- Investor · Vermont and New York · Member since 2023 · 308 posts · 309 votes3y
Quote from @Eliott Elias:
Why are you looking for an investor buying all cash? That is likely the least sophisticated investor you will meet.
That's a pretty naive statement. Can you explain? - 3yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes...and, pretty accurate.
Quote from @Tim J.:
Quote from @Eliott Elias:
Why are you looking for an investor buying all cash? That is likely the least sophisticated investor you will meet.
That's a pretty naive statement. Can you explain? - 3yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votesThe only cost to a REI is the cash they spend on the property. If you pay all cash you are paying the maximum = full price. If you pay 20% you are only paying 20% of the purchase price, and you are getting 5 times the property value of your cost.
Quote from @Tim J.:
What questions do you have about buying with cash? I did 4 deals last year with partners that were all cash.
I am also curious about why some folks are trying to convince the OP not to buy all cash. Strange.
In any event, BUYING all cash can be a powerful way to get into more and better deals. After the property is closed you can refi, and re-deploy the cash for other deals. Buying all cash give A LOT of weight to offers - and allows shorter closing times, lower price and essentially puts you on sellers' and realtors' speed dial for deals.
Also, the lower the cash in, the faster you can recover it, and start making a profit.
It's basic math. - Investor · Fort Lauderdale, FL · Member since 2020 · 1k+ posts · 755 votes3y
@Tim J. said it best. You can buy it in cash and then re-fi out of it afterwards. It will cost slightly more that way but if you are in a cash-competitive market, it's not a bad idea to buy in cash initially. You can easily do a conventional investor or DSCR loan right after.
- 3yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
Quote from @Ray Hage:
@Tim J. said it best. You can buy it in cash and then re-fi out of it afterwards. It will cost a bit more that way but if you are in a cash-competitive market, it's not a bad idea to buy in cash initially. You can easily do a conventional investor or DSCR loan right after.
Linear return...and slow. Starting out using same cash on multiple properties as DP's is an exponential return, and is a much better use of funds.
- Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes3y
Quote from @Zachary Bush:
Hello everyone. I am looking to connect with another member (preferably in the midwest) who is buying SFH or MFH with all cash. I am looking to get involved with investing as a second career when I retire from my W2 in 5-10 years. I am in the position to be able to buy a few properties with all cash and I was wanting to connect with someone who uses this "all cash" strategy. I realize most people here do not buy their RE properties with all cash, but I am wanting to ask some general questions and learn from anyone here who follows this method of investing. Thank you.
ZachI have done about 500 deals in OH with OOS and country cash buyers. Also, all my purchases have been cash. In the last two weeks or so I picked up 9 more doors all with 20% net caps or better, cash is king. What is your question?
All the best
- Member since 2023 · 216 posts · 133 votes3y
I feel the only time an all cash purchase is beneficial is if you plan on pulling the equity out in the form of a refi or HELOC. Which some will say that by just purchasing the property with a loan is no different. The one upside if you have equity all pulled in the form of a HELOC or cash out refi and are responsible with that "cash" you've pulled out is you have quick buying in the future where you don't need to worry about the hassle of obtaining financing. Cash talks and many times from my experiences puts you in the driver's seat at the negotiating table, all cash quick close deals are easier to obtain. I've gotten several good deals based solely on the cash and quick close offer.
But to really answer the question it will all depend on the strategy you plan to use, IMO 6 of 1 half dozen of the other, however if you have NO desire to pull equity out "quickly" then leverage your money and use loans to get the properties and if you have 100k in cash instead of buying 1 100k home buy 4 100k homes. It really is dependent on your end goal/exit strategy.
- 3yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes"The one upside if you have equity all pulled in the form of a HELOC or cash out refi and are responsible with that "cash" you've pulled out is you have quick buying in the future where you don't need to worry about the hassle of obtaining financing"
Quote from @Chris Merchant:
I feel the only time an all cash purchase is beneficial is if you plan on pulling the equity out in the form of a refi or HELOC. Which some will say that by just purchasing the property with a loan is no different. The one upside if you have equity all pulled in the form of a HELOC or cash out refi and are responsible with that "cash" you've pulled out is you have quick buying in the future where you don't need to worry about the hassle of obtaining financing. Cash talks and many times from my experiences puts you in the driver's seat at the negotiating table, all cash quick close deals are easier to obtain. I've gotten several good deals based solely on the cash and quick close offer.
But to really answer the question it will all depend on the strategy you plan to use, IMO 6 of 1 half dozen of the other, however if you have NO desire to pull equity out "quickly" then leverage your money and use loans to get the properties and if you have 100k in cash instead of buying 1 100k home buy 4 100k homes. It really is dependent on your end goal/exit strategy.
Isn't a refi and and a HELOC also "financing"? Also, how long will you be paying for the money you are buying through the refi, that is just sitting there...unused at a cost to you with no return? - 3yKerry Noble JrPro MemberInvestor · Indianapolis, IN · Member since 2018 · 2k+ posts · 1k+ votes
use the cash to get a better deal because you can close fast etc.....then put the long term financing on the property
- 3yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votesWaste of cash
Quote from @Kerry Noble Jr:
use the cash to get a better deal because you can close fast etc.....then put the long term financing on the property
- Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes3y
Hey Zachary, this is exactly what I do.
I'm in California and invest in Detroit. I have 12-doors there now. It's a fantastic market if you know what you're doing. I have a really strong team on the ground there and I do almost solely off-market stuff.
Happy to connect if you'd like to chat.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes3y
Quote from @Kerry Noble Jr:
use the cash to get a better deal because you can close fast etc.....then put the long term financing on the property
FAKE NEWS!!!!
This is rapidly becoming my #1 ANNOUANCE myth in real estate, the myth that "oh-oh-ohhh tell someone your going to pay all cash and they will hit the floor, praise your existence, and let you buy it for tens of thousands less than everyone else" it's simply NOT true.
Ok, let me ask you this, at closing, when selling to an FHA buyer, what does seller get?
At closing, for a VA buyer, what does seller get?
CASH!!!! It's ALL cash! Every time ALL THE TIME at closing, it's ALL CASH.
Terms matter, price matters, but HOW it turns into cash at closing nobody with half a brain cares, it's ALL cash at closing. FHA does not pay in vouchers for Subway, VA does not pay in Kohls Cash....
See, back in the day when WE (notice the WE, not them or others) made the terms "cash buyer" popularly known, it was MORE a reference to our TERMS than our payment action. When we made "ALL CASH OFFER" it was referring to the as-is, where-is, NO inspection, zero terms DONE-deal here's your offer AND I pay closing, offer. Or for short, all-cash-offer.
Now, people have twisted it to thinking just offer to pay in cash and people will be so wowed they will hand a massive discount. That's just not how it works.
ALL offers are cash offers at closing.
- 3yErin ChurchPro MemberReal Estate Agent · North Augusta, SC · Member since 2017 · 254 posts · 233 votes
@Zachary Bush
I agree with what many others said - cash to buy and then refi. It’s slower than just putting a mortgage on a property, but it’s such a huge advantage when it comes to purchasing. If you’re in no hurry, let it season and refi off of the appraised value (this can range from 4-12mo the usually).
My CPA has warned to never have leveraged and non-leveraged properties in the same LLC. So, I suggest a new LLC for cash purchase properties. (Not tax advice as I'm not a qualified tax professional.)
Fantastic that you’re in a position to purchase cash! :)
- 3yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
Quote from @James Hamling:
Quote from @Kerry Noble Jr:
use the cash to get a better deal because you can close fast etc.....then put the long term financing on the property
FAKE NEWS!!!!
This is rapidly becoming my #1 ANNOUANCE myth in real estate, the myth that "oh-oh-ohhh tell someone your going to pay all cash and they will hit the floor, praise your existence, and let you buy it for tens of thousands less than everyone else" it's simply NOT true.
Ok, let me ask you this, at closing, when selling to an FHA buyer, what does seller get?
At closing, for a VA buyer, what does seller get?
CASH!!!! It's ALL cash! Every time ALL THE TIME at closing, it's ALL CASH.
Terms matter, price matters, but HOW it turns into cash at closing nobody with half a brain cares, it's ALL cash at closing. FHA does not pay in vouchers for Subway, VA does not pay in Kohls Cash....
See, back in the day when WE (notice the WE, not them or others) made the terms "cash buyer" popularly known, it was MORE a reference to our TERMS than our payment action. When we made "ALL CASH OFFER" it was referring to the as-is, where-is, NO inspection, zero terms DONE-deal here's your offer AND I pay closing, offer. Or for short, all-cash-offer.
Now, people have twisted it to thinking just offer to pay in cash and people will be so wowed they will hand a massive discount. That's just not how it works.
ALL offers are cash offers at closing.
Give me a minute to figure out how I can vote more than once on this post. - Member since 2023 · 5 posts · 2 votes3y
Quote from @Ray Hage:
@Tim J. said it best. You can buy it in cash and then re-fi out of it afterwards. It will cost slightly more that way but if you are in a cash-competitive market, it's not a bad idea to buy in cash initially. You can easily do a conventional investor or DSCR loan right after.
I'm in a situation where I am going to have a lot of cash by the end of the year and my strategy as an Agent/Investor was going to be buying all cash and buying below market value and then immediately refinancing out but was told by several banks yesterday that by doing this I would have to wait 6 months before i could get a conventional investor mortgage on the property, Is this true?
- Real Estate Agent · Los Angeles, CA · Member since 2022 · 137 posts · 106 votes3y
@James Hamling is definitely correct.
Terms matter the most.
And to add to the idea of "terms matter most", Cash vs Financed is a term of confidence for the seller. If you're purchasing conventional and have enough cash in the bank to pay for it cash, your seller will be extremely confident in your ability to close, despite the fact you're getting the loan. Sellers want to know that if they choose your offer, you will close. Make sure you're tight with your contingency periods or even remove contingencies when possible and you'll find much greater "offer power" than simply buying cash.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes3y
Quote from @Benton Potts:
Quote from @Ray Hage:
@Tim J. said it best. You can buy it in cash and then re-fi out of it afterwards. It will cost slightly more that way but if you are in a cash-competitive market, it's not a bad idea to buy in cash initially. You can easily do a conventional investor or DSCR loan right after.
I'm in a situation where I am going to have a lot of cash by the end of the year and my strategy as an Agent/Investor was going to be buying all cash and buying below market value and then immediately refinancing out but was told by several banks yesterday that by doing this I would have to wait 6 months before i could get a conventional investor mortgage on the property, Is this true?
Ok, let me explain this with a little story.
Back in the day, ~2011/12 when everyone was jumping on the band wagon of trying to get a deal, claiming they had the bigger offer, I would tell people I GUARANTEE I would bring them the BIGGEST check of ANYONE, and if I didn't I'd give em a free steak dinner for whole family just for hearing me out.
I'd pull up, and pull out from back seat of car my 3'x9' tri-fold check. Lol. I kid you not. Knock on door, say the hi's and just ignor the fact I have this giant thing in my arm, as everyone looks. Come in, sit down, start talking, again ignoring this giant thing. Until finally I said, "oh, and yeah, ok, I guess maybe wondering on this". Where I would say, I promised the BIGGEST check and, as i open it up and plop it down on table pulling out my pen to sign I say "true to my word, the BIGGEST check, right" as I look to get confirmation that it is, in fact, the BIGGEST check.
And I used this to break the ice but also emphasis the fact that all that jazz is just BS marketing, because it is. And I'd tell them that, everyone pandering for their buy, it's just that, BS marketing to get them to sell to em, and that I am a horrible liar, that this is as jazzy as it get's and I just won't play the games. I work in win-wins. My word is titanium, I mean what I say and I get things done, full stop. So if they want to work with someone REAL, no BS, then we can make something work. If they want BS slogans, catch phrases and jazz, it's just not me, good luck, see ya bye.
In all the years I did these, I lost 1 seller to being scalped, 1.
People get it, they see the BS through it all, there simply not that dumb.
ALL offers are CASH offer at closing. People DON'T care how you get the cash to closing, that's your problem not there's. Why do agents say they prefer conventional over FHA? The inspection, nobody cares where the bank wire comes from, it's about TERMS.
TERMS are what matter, nobody is going to hand you a discount and sell UNDER market value because you said the word CASH. That's a feeble venture to attempt.
People WILL discount for favorable terms, which isn't a discount then is it, it's a TRADE.
- Member since 2023 · 5 posts · 2 votes3y
Quote from @James Hamling:
Quote from @Benton Potts:
Quote from @Ray Hage:
@Tim J. said it best. You can buy it in cash and then re-fi out of it afterwards. It will cost slightly more that way but if you are in a cash-competitive market, it's not a bad idea to buy in cash initially. You can easily do a conventional investor or DSCR loan right after.
I'm in a situation where I am going to have a lot of cash by the end of the year and my strategy as an Agent/Investor was going to be buying all cash and buying below market value and then immediately refinancing out but was told by several banks yesterday that by doing this I would have to wait 6 months before i could get a conventional investor mortgage on the property, Is this true?
Ok, let me explain this with a little story.
Back in the day, ~2011/12 when everyone was jumping on the band wagon of trying to get a deal, claiming they had the bigger offer, I would tell people I GUARANTEE I would bring them the BIGGEST check of ANYONE, and if I didn't I'd give em a free steak dinner for whole family just for hearing me out.
I'd pull up, and pull out from back seat of car my 3'x9' tri-fold check. Lol. I kid you not. Knock on door, say the hi's and just ignor the fact I have this giant thing in my arm, as everyone looks. Come in, sit down, start talking, again ignoring this giant thing. Until finally I said, "oh, and yeah, ok, I guess maybe wondering on this". Where I would say, I promised the BIGGEST check and, as i open it up and plop it down on table pulling out my pen to sign I say "true to my word, the BIGGEST check, right" as I look to get confirmation that it is, in fact, the BIGGEST check.
And I used this to break the ice but also emphasis the fact that all that jazz is just BS marketing, because it is. And I'd tell them that, everyone pandering for their buy, it's just that, BS marketing to get them to sell to em, and that I am a horrible liar, that this is as jazzy as it get's and I just won't play the games. I work in win-wins. My word is titanium, I mean what I say and I get things done, full stop. So if they want to work with someone REAL, no BS, then we can make something work. If they want BS slogans, catch phrases and jazz, it's just not me, good luck, see ya bye.
In all the years I did these, I lost 1 seller to being scalped, 1.
People get it, they see the BS through it all, there simply not that dumb.
ALL offers are CASH offer at closing. People DON'T care how you get the cash to closing, that's your problem not there's. Why do agents say they prefer conventional over FHA? The inspection, nobody cares where the bank wire comes from, it's about TERMS.
TERMS are what matter, nobody is going to hand you a discount and sell UNDER market value because you said the word CASH. That's a feeble venture to attempt.
People WILL discount for favorable terms, which isn't a discount then is it, it's a TRADE.
I am in an area that is somewhat rural where cash, real cash and close in a week mean something. These are the same type of people who leave so much money on the table because "I aint messin with no real-a-tor, and payin them fees" So cash and a quick close means something. My question was after I purchase the property thats worth 150k for 100k do I have to wait 6 months before I can apply for a mortgage and do i have to put a downpayment down if the property would be worth, in this case, 50k more than what i purchased it for.
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