Question: All cash vs loan

7 Replies

Hello. Thank you for reading and sharing any thoughts or key search words that might be helpful.

I am a first time buyer with bout 220k cash in the bank. Due to an illness, I cannot work consistently. I am living with family. Its not ideal, but its an option for now. I have good credit and no debt. Its challenging (and seems risky) getting a loan without income. I am in Oregon, its a feeding frenzy here with multiple escalating offers. I'm about 20k shy of affording most of the turn key small starter homes. My plan was to live with roommates until I can generate income via home business - or live with family and rent my house for income.

I have two goals: To own/occupy my own place, and to acquire multiple single family rental properties over the next few years. If the West coast is priced too high for a beginner to gain any leverage, then I'm open to the East Coast (though I would be in unfamiliar territory).

-How might an unemployed person with no income make the most of 220k cash? Is buying all cash the smartest first step to ownership under these circumstances? 

-Are there circumstances in which a lender will accept potential rent revenue as proof of income?

- Is there a low-risk, hands-off way to increase my liquid funds by maybe 10K or so within a couple months without taking a loan?


Open to new ideas and concepts.

Thanks!


@Amelia Ghold

I always recommend doing an owner occupied low money down loan since you're putting 3-5% down and are seeing insane CoC returns. But in your case without an income you won't qualify.

The other option is to have a family member co-sign on a single family owner occupied loan (2-4 can’t do non owner occupied coborrower) and then house hack by the bedroom.

You could also partner with someone who has a W2/is loanable and provide 1/2 of downpayment and split responsibilities.

Other option is just buy cash, could borrow a small portion for the remainder you don’t have privately.

@Amelia Ghold

With regards to investing some of your cash into real estate.

I worked with @Zach Lemaster  and his company (renttoretirement.com) for my first rental property (just closed last month). It was an out of state deal (I live in PA and the rental is in MO) for a single family residence and it was a turn-key investment. Zach deals in many different types of properties (single family, multi-family, commercial, etc.) in very good markets. 

Zach could definitely help you out with potential ways to begin investing and start generating income with your available cash.

@Joseph Schweizer Thank you for the shout out!

@Amelia Ghold

We've helped many investors just like yourself build a successful rental portfolio across numerous cash flow markets. It's all a numbers game, and the most successful investors invest in the markets where they get the best returns!

Please let me know if you have any questions on anything. I typically like to start with an initial phone call to discuss your investment goals/experiences, answer any questions you have, and tell you all about what our company has to offer. Please let me know if this is something you would like to schedule.

Also for your reference, here are some other forum discussions from investors that have worked with us in the past. I'm sure you'll find this informative. Looking forward to hopefully connecting in the near future!

https://www.biggerpockets.com/users/ZacharyCole/references

https://www.biggerpockets.com/forums/92/topics/518583-feedback-on-renttoretirement-and-zach-lemaster

https://www.biggerpockets.com/forums/92/topics/765347-rent-to-retirement-review

https://www.biggerpockets.com/forums/92/topics/893621-rent-to-retirement-review?highlight_post=5222888&page=1#p5222888

https://www.biggerpockets.com/forums/92/topics/808479-rent-to-retirement-experiences
https://www.biggerpockets.com/forums/12/topics/533693-anyone-worked-with-renttoretirement-turnkey
https://www.biggerpockets.com/forums/92/topics/581730-rent-to-retirement-zach

https://www.biggerpockets.com/forums/48/topics/874096-reviews-on-r2r-and-nch?page=1&utm_source=Iterable&utm_medium=email&utm_campaign=Transactional:%20topic_notification&utm_content=Transactional#p5123754

https://www.biggerpockets.com/forums/311/topics/883772-turnkey-investing-renttoretirement-feedback-reviews?highlight_post=5171720&page=1#p5171720
https://www.biggerpockets.com/users/ZacharyCole/references

@Amelia Ghold

To answer your quick questions:

-How might an unemployed person with no income make the most of 220k cash? Is buying all cash the smartest first step to ownership under these circumstances?

I would still recommend using leverage as that is a very powerful tool to expand your portfolio! You will just need to use a portfolio or private lender that does asset based loans since you will likely not qualify for conventional financing. We have many recommendations.

-Are there circumstances in which a lender will accept potential rent revenue as proof of income?

Yes

- Is there a low-risk, hands-off way to increase my liquid funds by maybe 10K or so within a couple months without taking a loan?

Loaded question here, but yes, there are some strategies to consider.  Happy to discuss further with you.

Hi @Amelia Ghold there are certainly options for loans without income and a larger downpayment. If you have an income producing property such as a 2-4 unit, you can utilize what's called a Debt Service Coverage Ratio to qualify for the property. Typically these are brokered loans that have higher interest rates than conventional loans, but if you are unable to work consistently / have steady income, a brokered loan like this may be a good option to help you get started in real estate. Please feel free to send me a message if you have other questions about the details of this.

Sorry to hear about your situation, but it seems like you have the right idea about getting into RE. 

I would recommend you find some way to get a loan or partner with someone who can. This will allow you to obtain and control more RE with the same amount of money. Returns are multiplied when your capital is leveraged, but so is your risk.

If you are risk adverse, then I would suggest going the cash route. Just be aware that you will not be able to scale as quickly as someone who uses leverage. 

-BA