Who's money is best !!!

13 Replies

Good morning all !!! I am new to investing and to the Phoenix area. What is the best way to buy investment property? I have a large a amount of cash to buy my first property, but have heard people in past say , use other people money and not your own. I don't like having to many hands in my pot and the cash is there to invest. what do you think is best?

I have the same mindset as you.  Cash is there is invest!  If not in real estate, then invested elsewhere.  Interest on a loan takes a huge chunk out of my cash flow and profit. If you buy with cash, you can always refinance to get your cash out for other needs or investments.  Just my 2 cents as a cautious investor.

If you can buy/rehab using only your own money then you can become your own bank in a sense.  Buy/rehab a property, refinance all your cash back out, and keep repeating this until you get tired of it.

2 Golden Rules of REI I follow:

Rule #1`:  Never under any circumstances spend your seed money...use it over and over again.  There is a difference between spending and using, as in the difference between a cost and and expense...even though you may be using the same dollar amount for the same thing in both cases.

Use a little of your money and a lot of bank money. The best thing about RE investing is the amount of leverage you can get.

Like @Joe Villeneuve said there is a big difference in using and spending. By using your own cash, and being able to invest in properties, you can use the same money over and over again. I think the OPM model helps most people who can't pay for properties in cash, or who need help financing. If you are able to buy a property in cash, do some fixes, refinance out the money, and then do it to another one, you will just be ahead in the game.

@Joe Villeneuve     What happened to Rule #2?   ;-)

@Keven C. Smith   Cash is king.  Being able to purchase with cash gives you an advantage over 95% of the small investors.  Your contracts don't have a financing contingency.  You can purchase properties that won't qualify for underwriting in their current condition.  You really can close quickly.  All of these things means you can go after the best deals.  

Use your cash for the purchase and rehab, force appreciation, and finance out of the property to maintain your working capital. If you don't want to be highly leveraged, you can always throw a straight rehab in occasionally to generate additional capital. In doing so, you don't have to finance up to the max LTV, but you can still get a significant chunk of your capital back out of the property.

Originally posted by @Keven C. Smith :

Good morning all !!! I am new to investing and to the Phoenix area. What is the best way to buy investment property? I have a large a amount of cash to buy my first property, but have heard people in past say , use other people money and not your own. I don't like having to many hands in my pot and the cash is there to invest. what do you think is best?

I have no issues with putting my own money into an investment, and even putting 25% down, you still are using a good deal of leverage to purchase a property. The down side is that unless you have a high income/savings rate, it will take a long time to make purchases because you will be saving for the down payment. I personally have been saving for over a year and still won't have enough for my next purchase for another 6 months. That is while saving aggressively and living far below my means and I am paid relatively well both at my job and through rental income. 

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Originally posted by @Geoffrey Hoffman :

I have the same mindset as you.  Cash is there is invest!  If not in real estate, then invested elsewhere.  Interest on a loan takes a huge chunk out of my cash flow and profit. If you buy with cash, you can always refinance to get your cash out for other needs or investments.  Just my 2 cents as a cautious investor.

 Thx just making sure I not the crazy one , doing thing backwards !!!!

@Keven C. Smith

  take your large sum of cash and deposit it in a local small community bank get to know your community banker and then set up credit with them... won't go against your fico and they will be there for you in the long run... best rates and you don't get killed with junk fee's like traditional lending... long term relationships.. and by a lot of money I would think mid 6 in cash would get some small commercial bankers attention.

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

Originally posted by @Keven C. Smith:

Good morning all !!! I am new to investing and to the Phoenix area. What is the best way to buy investment property? I have a large a amount of cash to buy my first property, but have heard people in past say , use other people money and not your own. I don't like having to many hands in my pot and the cash is there to invest. what do you think is best?

 I am reading the post and understand most of what is being said. My main thing I am missing is why take out loans , and have to pay back with interest. I have about 100k a month after my wife and I pay ourselves a salary. ( we own 100% of business  ) I am looking to build as much  personal wealth while things are good.

Originally posted by :

    What happened to Rule #2? 

Rule #2?

Never forget Rule #1

Originally posted by @Keven C. Smith :
Originally posted by @Keven C. Smith:

Good morning all !!! I am new to investing and to the Phoenix area. What is the best way to buy investment property? I have a large a amount of cash to buy my first property, but have heard people in past say , use other people money and not your own. I don't like having to many hands in my pot and the cash is there to invest. what do you think is best?

 I am reading the post and understand most of what is being said. My main thing I am missing is why take out loans , and have to pay back with interest. I have about 100k a month after my wife and I pay ourselves a salary. ( we own 100% of business  ) I am looking to build as much  personal wealth while things are good.

 Because your tenant pays the interest.

When you put your cash into a deal and leave it there, you are buying the house and your cash flow is playing catchup to breaking even.

Hi Mr. Smith

If you and I were sitting together over a cup of coffee, I would ask about your experience level with real estate and real estate investing.  Do you have the knowledge and experience to understand how to purchase, rehab and then rent to well screened tenants.  If the answer is no, I would suggest Joint Venture with an experienced real estate investor.  If you are interested in more info, I would be happy to chat with you one on one.

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