Buying property-All Cash
Member since 2021 · 38 posts · 20 votes
Buying property-All Cash
Most Popular Reply
Melanie P.Pro Member
Rental Property Investor · Member since 2023 · 1k+ posts · 922 votesFor most people starting out all-cash is not an option. Another way of looking at this is how much appreciation did you give up while saving to do the transaction all-cash. In economics this is called an "opportunity cost."
116 Replies
- 2yCam SchwartzBusiness MemberLender · Chicago, IL · Member since 2024 · 102 posts · 48 votes
Eric, you're absolutely correct. Buying with all cash is an excellent strategy, particularly as it relates to security and maximizing profit/cash flow. For example, a vacant rental property purchased with all cash is far less a burden than another with a monthly mortgage payment.
One advantage that leverage does provide is the return on your investment. Used correctly, you can generate far more profit on each dollar invested than with all cash. See the below example for a fix-and-flip:
Purchase: $100
Rehab: $30
ARV: $170
Before carrying costs and commissions, you would generate $40 in profit on $130 invested with all cash (~31% ROI). That same project, with say 85% LTC on the purchase and 100% of rehab funds (85 + 30 = $115 total loan) would generate a profit of say, $30, after paying lender fees. Your $30 profit on a total investment of $25 ($15 down payment + $10 in lender fees) would represent a 120% ROI. Said differently, with all cash you would generate 30 cents of profit for each dollar invested vs $1.20 in profit for each dollar invested with leverage. The key here is to ensure you complete the project on time and on budget.
Regardless, while leverage presents the potential for a greater ROI, there is inherent risk that should be considered before taking out a loan. If you have the cash to buy in full and aren't in a rush to add doors to your portfolio then cash is the safest bet!
- Pittsfield Massachusetts · Member since 2015 · 3 posts · 1 vote2y
Quote from @Eric Justice: yes I agree. This was my first purchance as I could not secure a loan. We had some money saved and borrowed the rest. To start. Chipped away at it. Tore down a house, then a garage. Continued to develop the land.
started to realize we could build a house ourselves and stop paying rent but keep some of the land to sell in future. We r half way there and just bought the land abutting the property. A lot of hard work and sacrifice and we are still going. If we didn't jump, we would still have nothing.
It seems that purchasing property in all cash would have the best outcome for investments. The owner would not have a mortgage. The owner would have to pay property taxes. Buying with all cash gives the owner the option to lease or live in the property. Buying assets in all cash can increase savings over time. Overall, this is the most secure and reliable form of real estate investing. 🏠👍
- 2yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Scott Trench:
Quote from @V.G Jason:
Quote from @Scott Trench:
Quote from @K S.:
I paid cash for 5 small condos over an 18 year period. In hindsight, paying cash did not make sense at that time because interest rates were dropping and the 1% rule was possible at that time making paying the mortgage with 20% down possible thus could have leveraged myself and been in a better position today but I had bad credit and wanted the comfort of tangible assets and a payout every month giving me the feeling of security but surprise,
None of this made any sense as you could also invest in dividend funds that payout every month, but I also realized, a young person working a career in his prime does not need cashflow. Dividens or rent payment make no sense until after retirement. The comfort and safety of rental cash or dividens when you won't need it for the next 30 years is wasting opportunities to grow faster.
The benefit of no mortgages to keep track of is nice, but near 20 years later, I realized that simply putting it in the S&P 500 would have netted way more in net worth today. I lost hundreds of thousands if not over a million for ideas that did not serve my future net worth building. Ideas like comfort, security and no hassle of a mortgage. This is something you do in retirement, not in your 20s and 30s. Definately pay it off if you're retiring.
For example, the average rate of appreciation on a property is 4%. The S&P 500 averaged around 12% during the same time period when I purchased my first house.
The greater cash flow was good for peace of mind only but served no purpose as I didn't need it. Reinvesting that cashflow into the S&P 500 or dividens would not make up for the gap between real estate appreciation and the S&P 500 as I had already done the math in detail using my own tax returns. You simply will do worse in the long run if you purchase a house or condo in cash as it's tying up to much money for too little return.
All this means nothing today as prices and interest rates are too high. The 1% rule is more like .5% now as I can attest with the sale of my own house and condo. In fact, whoever purchased my condo is now paying $4,600/month but I was just renting it out for $2,300/month in San Diego. You can reinvest those savings at way higher than appreciation.
So buying in cash or obtaining a mortgage are both out of the question for the more passive investor.
Also, don't listen to people who continue old school book advice about putting 20% down on multiple properties for leverage. At these prices and interest rates, you need 50% down. See how long you can leverage negative cashflow.
Last piece of advice, unlike John Morgan, I don't think debt until you die is good. Owning your home outright free and clear in retirement is the way to go as nobody wants to deal with tenants, headaches, lawsuites, constantly rotating older properties for newer ones, renovations, searching, offering, buying etc. It's exahusting. Plus your mind fades as you get older and you may not not be able to handle it. No caretaker or family member will manage your portfolio for you.
In conclusion, the answers are simple, for a more passive real estate investor like myself, it's time to move on to index funds like the S&P 500 and or buying land in cash which is more manageable, and build on the land when the time is right. With all the new ADU laws and land buying, it might be the next boom of the decade that nobody is talking about it.
I actually really appreciate this comment. The paradoxes and seeming contradictions in here reveal your experience and life lessons.
However I want to challenge a few things:
- Cash flow is not valuable until later in life.
I disagree. Cash flow early in life may enable entrepreneurship, comfort with a gap year, etc. when one has a minimum amount of cash flow to retire early in life the optionality is huge.
- RE is overpriced so buy stocks.
Real estate is expensive, yes, but so is everything else. S&P is at 25X earnings. RE at a 5-5.5 cap is priced at 18-20X. You gonna buy bitcoin? Or lend? (Good option but does not solve for long term wealth the same way as equity).While I’m a bit bearish on rents for the next 24 months, I think they explode nationwide when multifamily supply stops coming online in 2H 2025, especially if rates stay high.
Completely agree that in many markets the property does not cash flow without higher down payment (hence the topic of this discussion) and that attempting to sustain and scale a cash flow negative investment is inviting disaster.
Last, I think most of us know that stocks beat unlevered real estate in the long run.
But, sometimes the long run isn't a math game. If I back into owning a portfolio that spits out $10K in monthly NOI, unlevered that's as good a bet as any on an inflation adjusted $10K for the rest of my life. Sure there will be puts and takes, but in terms of getting a great shot at a reliable inflation adjusted income stream, that's one of the best out there.
No more math games from there on out. That’s what freedom feels like to me.
In response to strictly the bold, BTRs are what I think make a massive rent increase. That's more so going to realize in 2027 as 2026 it caps. No? From what I saw MF stop in 2025, BTR 2026. Rent's take a year to realize. So 2027?
Good stuff here - could absolutely be right. I think that’s good caution and perspective. For me, that’s why it’s so important to be in the game and stay in the game for decades. I feel super confident that there will be long term rent growth, even relative to inflation, but I feel less confident predicting it to the year.
Buying consistently, but not aggressively, with modest leverage is how I feel most confident building wealth.
Bold part-- this is how you'll grow best and safest. Also always prioritizing location over anything else. If a great location takes 3 years, and a solid one takes every 1.5-2 years-- take the former option. No, it doesn't get you "more doors" or what not, but from a risk profile it's incredibly more sound.
As for the rent dilemma, post 2027 I think now if rates say are 5% or sub rather than housing inventory growing to making it pre-covid or close to it. I think you see low-rate buyers become landlords and giving the rental market the liquidity it needs, so that changes RTP and housing inventory a ton. The question is what % of expected sellers would prefer to rent their house 2027 & post versus sell to buy a new house. That's the next big hurdle in this; but I think it's safe to say next 2 years is flat to decline in rental price growth and year 3 will be a small, sub inflation bump.
- 2yJulie MuseBusiness MemberFlipper/Rehabber · North Georgia · Member since 2024 · 322 posts · 94 votes
Hey there!
Buying property with all cash can indeed be a great strategy, but let’s not forget a couple of key points:
Leverage is Your Friend
Using a mortgage allows you to leverage your investment. It’s like sweet tea – a little goes a long way. By financing, you can potentially buy more properties and diversify your investments.
Liquidity Matters
Tying up all your cash in one property can limit your liquidity. What if you need cash for an emergency or another great investment opportunity? Having some financing keeps your options open.
Risk and Reward
While paying all cash reduces risk, it also limits your potential returns. Balancing risk and reward is crucial in real estate investing.
Bottom Line
There’s no one-size-fits-all answer. To each their own! It depends on your financial situation and investment goals. Just remember, real estate investing is a bit like making biscuits – there’s more than one way to do it right!
Hope this helps!
Best, Julie Muse
Partner Driven4.7124 Reviews - Oak Park, IL · Member since 2014 · 285 posts · 114 votes2y
Leverage is great but risk should be managed. I have $1.5 million total in 6 mortgages while I have 7 properties that are all paid off. Total loan amount is $1.5 million while my RE portfolio is worth $6.5 million. Part of the reason is that I used leverage at low interest rates but I kept paying off properties one by one to reduce risk. Never used real estate cash flow for living expenses but only used it for making extra payments to one chosen property at a time. Always lived off W2 jobs even when I had enough cash flow to retire. A few houses (cheaper ones) were bought in cash and were never mortgaged. I have paid off $2 million loan in mortgages while there has been appreciation of properties as well I donot want to lose sleep when a few tenants leave or I have waterproofing or permit expense of commercial property of $30000 all of a sudden. I preferred to take leverage because I could buy smaller properties (condo, SFH, townhouse etc.) for cash but not a 6 unit apartment building or a commercial 5 store unit for cash. Use leverage but little carefully.
- Member since 2021 · 38 posts · 20 votes2y
People buying a property in all cash can help future generations. I think it can help improve homelessness.
- Member since 2024 · 18 posts · 10 votes2y
Buying property with all cash has its perks, but it's important to weigh both the pros and cons. Here’s a quick rundown:
Pros:
- No Mortgage Payments: You won't have to worry about monthly loan payments.
- Full Ownership: You immediately own the property outright.
- Flexibility: You can easily choose to live in it or rent it out.
- Savings: No interest payments or mortgage fees.
- Negotiation Edge: Sellers often prefer cash buyers, which can help you get a better deal.
Cons:
- Opportunity Cost: Your cash is tied up in the property, so you might miss out on other investment opportunities.
- Liquidity: Real estate isn't easy to convert to cash quickly.
- Risk Concentration: Investing a lot in one property can be risky.
- Ongoing Expenses: You'll still need to cover property taxes, maintenance, and insurance.
Do whatever makes sense for you! Every investor's approach is different.
- Member since 2021 · 38 posts · 20 votes2y
Quote from @Cam Schwartz:
Eric, you're absolutely correct. Buying with all cash is an excellent strategy, particularly as it relates to security and maximizing profit/cash flow. For example, a vacant rental property purchased with all cash is far less a burden than another with a monthly mortgage payment.
One advantage that leverage does provide is the return on your investment. Used correctly, you can generate far more profit on each dollar invested than with all cash. See the below example for a fix-and-flip:
Purchase: $100
Rehab: $30
ARV: $170
Before carrying costs and commissions, you would generate $40 in profit on $130 invested with all cash (~31% ROI). That same project, with say 85% LTC on the purchase and 100% of rehab funds (85 + 30 = $115 total loan) would generate a profit of say, $30, after paying lender fees. Your $30 profit on a total investment of $25 ($15 down payment + $10 in lender fees) would represent a 120% ROI. Said differently, with all cash you would generate 30 cents of profit for each dollar invested vs $1.20 in profit for each dollar invested with leverage. The key here is to ensure you complete the project on time and on budget.
Regardless, while leverage presents the potential for a greater ROI, there is inherent risk that should be considered before taking out a loan. If you have the cash to buy in full and aren't in a rush to add doors to your portfolio then cash is the safest bet!
The only thing is, I would not touch the property. I would not rehab anything. It's a simple strategy. Buy & Hold
- 2yEngelo RumoraBusiness MemberInvestor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
Quote from @Eric Justice:
It seems that purchasing property in all cash would have the best outcome for investments. The owner would not have a mortgage. The owner would have to pay property taxes. Buying with all cash gives the owner the option to lease or live in the property. Buying assets in all cash can increase savings over time. Overall, this is the most secure and reliable form of real estate investing. 🏠👍
100% agreed.
I've witnessed way to many investors over the years getting caught with their pants down when using too much leverage.
The real estate "guru" world is incentivized by selling more properties (Realtors earn commissions on every property sold) and "no money or low money" strategies (Easy way to flog books and seminars), etc...
So leverage to the tilt they would say...
The best deals are bought quickly and with cash.
All good things take time and so does building a strong and sustainable real estate portfolio.
Start slow and small and build the foundation of your portfolio with cash.
This will minimize losses when vacancies occur and one hopefully won't have to put their hand too deep in their own pocket to cover expenses as they occur (Especially large expenses like mortgage costs).
Once a solid foundation has been built and experience gained over a period of time of what the true income vs expenses will be, then look at using leverage.
Also, all deals should be analyzed from a "devils advocate" standpoint and don't get too excited about it's initial prospects.
If you think it won't happen to, I'm here to tell you that it will.
This is coming from someone that has done hundreds of deals and has seen it all.
Always protect the bottom line first and foremost.
Much success - 2yEngelo RumoraBusiness MemberInvestor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
Quote from @Cam Schwartz:
Eric, you're absolutely correct. Buying with all cash is an excellent strategy, particularly as it relates to security and maximizing profit/cash flow. For example, a vacant rental property purchased with all cash is far less a burden than another with a monthly mortgage payment.
One advantage that leverage does provide is the return on your investment. Used correctly, you can generate far more profit on each dollar invested than with all cash. See the below example for a fix-and-flip:
Purchase: $100
Rehab: $30
ARV: $170
Before carrying costs and commissions, you would generate $40 in profit on $130 invested with all cash (~31% ROI). That same project, with say 85% LTC on the purchase and 100% of rehab funds (85 + 30 = $115 total loan) would generate a profit of say, $30, after paying lender fees. Your $30 profit on a total investment of $25 ($15 down payment + $10 in lender fees) would represent a 120% ROI. Said differently, with all cash you would generate 30 cents of profit for each dollar invested vs $1.20 in profit for each dollar invested with leverage. The key here is to ensure you complete the project on time and on budget.
Regardless, while leverage presents the potential for a greater ROI, there is inherent risk that should be considered before taking out a loan. If you have the cash to buy in full and aren't in a rush to add doors to your portfolio then cash is the safest bet!
"For example, a vacant rental property purchased with all cash is far less a burden than another with a monthly mortgage payment."
Yes and Yes... - Member since 2021 · 401 posts · 254 votes2y
Here's one youtube link of many showing that renting is better. Buying cash can only be worse considering that cash can be invested at way higher than the average rate of appreciation of 3%. But this question continues to be asked over and over again when it's a pretty simple answer. If you have the money and don't care that you'll lose 900k in a decade from not investing that cash into the market instead. Then buy cash. It's your money. I'm not saying to buy with a mortgage either as the video states, this is bad investment advice as well for the average american at this moment in time (unless you're starting a family and can afford it). Leveraging yourself could also take a lot of properties like 10? just to beat the market according to another video breakdown so I also don't trust the leverage guys. If you're the type of person that has to ask this question, then just put your money in the market and wipe your hands and be done with it. Try VOO (S&P 500) or similar dividend fund which doesn't make sense but some people like the psychological feeling of monthly "rent" like checks. And remember, you can average down during a 50% crash. But when real estate crashed 50% during the great recession, nobody averaged down, it's called foreclosure. And don't forget to max your 401k matching. I've already earned about 100k in just a few years of maxing with my employers 5% match. Don't fall for the RE hype.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes2y
Quote from @K S.:
Here's one youtube link of many showing that renting is better. Buying cash can only be worse considering that cash can be invested at way higher than the average rate of appreciation of 3%. But this question continues to be asked over and over again when it's a pretty simple answer. If you have the money and don't care that you'll lose 900k in a decade from not investing that cash into the market instead. Then buy cash. It's your money. I'm not saying to buy with a mortgage either as the video states, this is bad investment advice as well for the average american at this moment in time (unless you're starting a family and can afford it). Leveraging yourself could also take a lot of properties like 10? just to beat the market according to another video breakdown so I also don't trust the leverage guys. If you're the type of person that has to ask this question, then just put your money in the market and wipe your hands and be done with it. Try VOO (S&P 500) or similar dividend fund which doesn't make sense but some people like the psychological feeling of monthly "rent" like checks. And remember, you can average down during a 50% crash. But when real estate crashed 50% during the great recession, nobody averaged down, it's called foreclosure. And don't forget to max your 401k matching. I've already earned about 100k in just a few years of maxing with my employers 5% match. Don't fall for the RE hype.
Why are you here K S.? I mean, other than to Troll? I don't see anything but Trolling here and hilarious levels of misinformation.
How about a Reality Check, shall we....
Real world scenario, one I just looked at. Brand new build, so no maint or cap-x for years making #'s simpler to flesh out. $340k on buy, market rent's $2,700mnth. I know this is market rent because I already lease others at this in this community of this exact floor plan.
I have $32,400 annual revenue. Minus HOA, P.tax, insurance and all operational expenses I have $26,950 OR in % I have a 7.9% COC.... Already, without anything else, I just beat most everything in "the market"......
BUT, I ALSO get appreciation which assuming really long hold is 2.9% as shown as median as averaged out over many decades. That's another $9,860 in my pocket putting us now at 10.8% ROI.
But wait, it get's BETTER.... because rents are not static, rents go up at about 4.5% annual.....
It's laughable, LAUGHABLE, to try and compare index funds too REI.
And what does one do in an '08' style "collapse", duh, ya DON'T sell, ya RENT IT OUT! Because guess what happened in '08' when OVER-LEVERAGED fools were suffering there accountability of dumb financial actions? Yeah, they became TENANTS! Rents shot through the roof as the demand exploded! So hummm let's see, what to do what to do, rent's going up 20%+ annual OR I can sell at huge discount, what to do, what to do...... ya RENT it out! And within a few years, like magic all equity is back and then some.
And now biggest problem is the property is such a cash-cow that ya don't ever want to let it go.
- Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes2y
@Eric Justice- thanks . decent points ...The majority of home buyers cant buy a property with cash
- 2yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votesI always laugh when I see people try to compare the stock market and REI. Their examples always prove how little they understand about REI
Quote from @James Hamling:
Quote from @K S.:
Here's one youtube link of many showing that renting is better. Buying cash can only be worse considering that cash can be invested at way higher than the average rate of appreciation of 3%. But this question continues to be asked over and over again when it's a pretty simple answer. If you have the money and don't care that you'll lose 900k in a decade from not investing that cash into the market instead. Then buy cash. It's your money. I'm not saying to buy with a mortgage either as the video states, this is bad investment advice as well for the average american at this moment in time (unless you're starting a family and can afford it). Leveraging yourself could also take a lot of properties like 10? just to beat the market according to another video breakdown so I also don't trust the leverage guys. If you're the type of person that has to ask this question, then just put your money in the market and wipe your hands and be done with it. Try VOO (S&P 500) or similar dividend fund which doesn't make sense but some people like the psychological feeling of monthly "rent" like checks. And remember, you can average down during a 50% crash. But when real estate crashed 50% during the great recession, nobody averaged down, it's called foreclosure. And don't forget to max your 401k matching. I've already earned about 100k in just a few years of maxing with my employers 5% match. Don't fall for the RE hype.
Why are you here K S.? I mean, other than to Troll? I don't see anything but Trolling here and hilarious levels of misinformation.
How about a Reality Check, shall we....
Real world scenario, one I just looked at. Brand new build, so no maint or cap-x for years making #'s simpler to flesh out. $340k on buy, market rent's $2,700mnth. I know this is market rent because I already lease others at this in this community of this exact floor plan.
I have $32,400 annual revenue. Minus HOA, P.tax, insurance and all operational expenses I have $26,950 OR in % I have a 7.9% COC.... Already, without anything else, I just beat most everything in "the market"......
BUT, I ALSO get appreciation which assuming really long hold is 2.9% as shown as median as averaged out over many decades. That's another $9,860 in my pocket putting us now at 10.8% ROI.
But wait, it get's BETTER.... because rents are not static, rents go up at about 4.5% annual.....
It's laughable, LAUGHABLE, to try and compare index funds too REI.
And what does one do in an '08' style "collapse", duh, ya DON'T sell, ya RENT IT OUT! Because guess what happened in '08' when OVER-LEVERAGED fools were suffering there accountability of dumb financial actions? Yeah, they became TENANTS! Rents shot through the roof as the demand exploded! So hummm let's see, what to do what to do, rent's going up 20%+ annual OR I can sell at huge discount, what to do, what to do...... ya RENT it out! And within a few years, like magic all equity is back and then some.
And now biggest problem is the property is such a cash-cow that ya don't ever want to let it go.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes2y
Quote from @Eric Justice:
People buying a property in all cash can help future generations. I think it can help improve homelessness.
Fun fact on homelessness, they actually invented a magical vaccination for that "disease" many MANY years back that has all but 100% effective rate. It's called a J-O-B....
- Member since 2021 · 38 posts · 20 votes2y
Quote from @James Hamling:
Quote from @Eric Justice:
People buying a property in all cash can help future generations. I think it can help improve homelessness.
Fun fact on homelessness, they actually invented a magical vaccination for that "disease" many MANY years back that has all but 100% effective rate. It's called a J-O-B....
I think we can both agree that it’s a global problem though, right? Dependency is one of the contributing causes of homelessness.
- Member since 2021 · 38 posts · 20 votes2yYou’re welcome.
Quote from @Dave Skow:
@Eric Justice- thanks . decent points ...The majority of home buyers cant buy a property with cash
- Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes2y
The total return on unleveraged real estate is about the same as holding SP500 but with 10x the work and risk. Real estate needs either mortgages to make sense as investment or strong value adds to create equity for a high return.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes2yI don't know what your trying to say or infer here.
Quote from @Eric Justice:
Quote from @James Hamling:
Quote from @Eric Justice:
People buying a property in all cash can help future generations. I think it can help improve homelessness.
Fun fact on homelessness, they actually invented a magical vaccination for that "disease" many MANY years back that has all but 100% effective rate. It's called a J-O-B....
I think we can both agree that it’s a global problem though, right? Dependency is one of the contributing causes of homelessness.
I don't understand what your meaning by saying dependency as contributing cause of homelessness.
I don't understand anything of what your trying to say here.
Have you traveled around the world? What country are you speaking of?
And before quip "well no, but where have you been around the world" I warn, that would be a long, long list. - Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes2y
Quote from @Henry Lazerow:
The total return on unleveraged real estate is about the same as holding SP500 but with 10x the work and risk. Real estate needs either mortgages to make sense as investment or strong value adds to create equity for a high return.
No.... no it's not, lol. Not even close.
FYI if you actually read through just this thread you'd see I literally laid out the math on a real world property and comparison of the two. Real Estate out performs the S&P by a multiplication factor, literally.
It's possible to do worse in real estate, but man-o-man ya gotta do a whole lot of dumb things, repeatedly, to get there.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes2y
Quote from @Eric Justice:
Quote from @James Hamling:
Quote from @Eric Justice:
People buying a property in all cash can help future generations. I think it can help improve homelessness.
Fun fact on homelessness, they actually invented a magical vaccination for that "disease" many MANY years back that has all but 100% effective rate. It's called a J-O-B....
I think we can both agree that it’s a global problem though, right? Dependency is one of the contributing causes of homelessness.
Now if switch to say homelessness is a problem in USA, yup it is.
And that ENTITLEMENT is a contributing cause, yup again. I'd even go a step further and say PRIMARY contributing cause.
I can whole heartedly agree on this.
- Member since 2021 · 401 posts · 254 votes2y
Quote from @James Hamling:
Quote from @K S.:
Here's one youtube link of many showing that renting is better. Buying cash can only be worse considering that cash can be invested at way higher than the average rate of appreciation of 3%. But this question continues to be asked over and over again when it's a pretty simple answer. If you have the money and don't care that you'll lose 900k in a decade from not investing that cash into the market instead. Then buy cash. It's your money. I'm not saying to buy with a mortgage either as the video states, this is bad investment advice as well for the average american at this moment in time (unless you're starting a family and can afford it). Leveraging yourself could also take a lot of properties like 10? just to beat the market according to another video breakdown so I also don't trust the leverage guys. If you're the type of person that has to ask this question, then just put your money in the market and wipe your hands and be done with it. Try VOO (S&P 500) or similar dividend fund which doesn't make sense but some people like the psychological feeling of monthly "rent" like checks. And remember, you can average down during a 50% crash. But when real estate crashed 50% during the great recession, nobody averaged down, it's called foreclosure. And don't forget to max your 401k matching. I've already earned about 100k in just a few years of maxing with my employers 5% match. Don't fall for the RE hype.
Why are you here K S.? I mean, other than to Troll? I don't see anything but Trolling here and hilarious levels of misinformation.
How about a Reality Check, shall we....
Real world scenario, one I just looked at. Brand new build, so no maint or cap-x for years making #'s simpler to flesh out. $340k on buy, market rent's $2,700mnth. I know this is market rent because I already lease others at this in this community of this exact floor plan.
I have $32,400 annual revenue. Minus HOA, P.tax, insurance and all operational expenses I have $26,950 OR in % I have a 7.9% COC.... Already, without anything else, I just beat most everything in "the market"......
BUT, I ALSO get appreciation which assuming really long hold is 2.9% as shown as median as averaged out over many decades. That's another $9,860 in my pocket putting us now at 10.8% ROI.
But wait, it get's BETTER.... because rents are not static, rents go up at about 4.5% annual.....
It's laughable, LAUGHABLE, to try and compare index funds too REI.
And what does one do in an '08' style "collapse", duh, ya DON'T sell, ya RENT IT OUT! Because guess what happened in '08' when OVER-LEVERAGED fools were suffering there accountability of dumb financial actions? Yeah, they became TENANTS! Rents shot through the roof as the demand exploded! So hummm let's see, what to do what to do, rent's going up 20%+ annual OR I can sell at huge discount, what to do, what to do...... ya RENT it out! And within a few years, like magic all equity is back and then some.
And now biggest problem is the property is such a cash-cow that ya don't ever want to let it go.
Ah the classic troll accusation to bring more credence to your own argument so you don't have to bring as much substance to your own. Your excessive use of ALL CAPS shows your overly emotional investment to a very low stakes situation. I'm surprised you haven't been banned yet with your condescending attitude towards other peoples experiences which only derails the integrity of the subject matter and exposes your own maturity level.
And to answer your question, I'm here responding because I have purchased 7 properties in all cash over the years making my personal experience a perfect fit to answer this particular subject as I have first hand experience and can provide actual value to the subject. What's laughable, I mean LAUGHABLE, is your theoretical example from the interweb when I brought receipts using my actual tax statements and 1099s.
Secondly, the OP or other questioner has expressed gratitude for my wisdom on this subject.
I notice in every thread you respond to, you brag about your own personal success in order to lift your fragile ego so I'll mention that I also recently purchased a condo with a 7.6% COC return in San Diego last year. But even at 10% with appreciation as you stated, that doesn't beat the 13% the S&P 500 did over the last decade. Sorry but 13% beats 10% even with the perks. What most don't realize is that 13% is compounding. Your cash on cash return does not compound. You realize that correct? It's always 7.9% on your principal no matter how much appreciation you gain, but the S&P 500 compounds. As you make an additional $25/year in rent appreciation, your HOA + Property taxes + maintenance + these new insurance premiums + lawsuit risks, will consume your $25/year increase. I know because I've owned a house for 20 years. I know macro economics is important so anyone can search the internet and come up with their own theories on the subject or a more favorable example and that's great, but this is just my personal experience. Your mileage may vary. But to call someone a troll is a cheap shot exposing your own inability to acknowledge others experiences and exposes your emotional maturity level. Reported! - Member since 2021 · 401 posts · 254 votes2y
Quote from @Joe Villeneuve:
I always laugh when I see people try to compare the stock market and REI. Their examples always prove how little they understand about REIQuote from @James Hamling:
Quote from @K S.:
Here's one youtube link of many showing that renting is better. Buying cash can only be worse considering that cash can be invested at way higher than the average rate of appreciation of 3%. But this question continues to be asked over and over again when it's a pretty simple answer. If you have the money and don't care that you'll lose 900k in a decade from not investing that cash into the market instead. Then buy cash. It's your money. I'm not saying to buy with a mortgage either as the video states, this is bad investment advice as well for the average american at this moment in time (unless you're starting a family and can afford it). Leveraging yourself could also take a lot of properties like 10? just to beat the market according to another video breakdown so I also don't trust the leverage guys. If you're the type of person that has to ask this question, then just put your money in the market and wipe your hands and be done with it. Try VOO (S&P 500) or similar dividend fund which doesn't make sense but some people like the psychological feeling of monthly "rent" like checks. And remember, you can average down during a 50% crash. But when real estate crashed 50% during the great recession, nobody averaged down, it's called foreclosure. And don't forget to max your 401k matching. I've already earned about 100k in just a few years of maxing with my employers 5% match. Don't fall for the RE hype.
Why are you here K S.? I mean, other than to Troll? I don't see anything but Trolling here and hilarious levels of misinformation.
How about a Reality Check, shall we....
Real world scenario, one I just looked at. Brand new build, so no maint or cap-x for years making #'s simpler to flesh out. $340k on buy, market rent's $2,700mnth. I know this is market rent because I already lease others at this in this community of this exact floor plan.
I have $32,400 annual revenue. Minus HOA, P.tax, insurance and all operational expenses I have $26,950 OR in % I have a 7.9% COC.... Already, without anything else, I just beat most everything in "the market"......
BUT, I ALSO get appreciation which assuming really long hold is 2.9% as shown as median as averaged out over many decades. That's another $9,860 in my pocket putting us now at 10.8% ROI.
But wait, it get's BETTER.... because rents are not static, rents go up at about 4.5% annual.....
It's laughable, LAUGHABLE, to try and compare index funds too REI.
And what does one do in an '08' style "collapse", duh, ya DON'T sell, ya RENT IT OUT! Because guess what happened in '08' when OVER-LEVERAGED fools were suffering there accountability of dumb financial actions? Yeah, they became TENANTS! Rents shot through the roof as the demand exploded! So hummm let's see, what to do what to do, rent's going up 20%+ annual OR I can sell at huge discount, what to do, what to do...... ya RENT it out! And within a few years, like magic all equity is back and then some.
And now biggest problem is the property is such a cash-cow that ya don't ever want to let it go.
Show me your actual 1099 and property address and I'll plug in the numbers today and see if buying in cash would be better than putting it in the S&P 500 and we'll see who has the last laugh.
- 2yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
Quote from @K S.:
Ah the classic troll accusation to bring more credence to your own argument so you don't have to bring as much substance to your own. Your excessive use of ALL CAPS shows your overly emotional investment to a very low stakes situation. There's no reason to talk down to people in every thread you respond to. I'm surprised you haven't been banned yet.Quote from @James Hamling:
Quote from @K S.:
Here's one youtube link of many showing that renting is better. Buying cash can only be worse considering that cash can be invested at way higher than the average rate of appreciation of 3%. But this question continues to be asked over and over again when it's a pretty simple answer. If you have the money and don't care that you'll lose 900k in a decade from not investing that cash into the market instead. Then buy cash. It's your money. I'm not saying to buy with a mortgage either as the video states, this is bad investment advice as well for the average american at this moment in time (unless you're starting a family and can afford it). Leveraging yourself could also take a lot of properties like 10? just to beat the market according to another video breakdown so I also don't trust the leverage guys. If you're the type of person that has to ask this question, then just put your money in the market and wipe your hands and be done with it. Try VOO (S&P 500) or similar dividend fund which doesn't make sense but some people like the psychological feeling of monthly "rent" like checks. And remember, you can average down during a 50% crash. But when real estate crashed 50% during the great recession, nobody averaged down, it's called foreclosure. And don't forget to max your 401k matching. I've already earned about 100k in just a few years of maxing with my employers 5% match. Don't fall for the RE hype.
Why are you here K S.? I mean, other than to Troll? I don't see anything but Trolling here and hilarious levels of misinformation.
How about a Reality Check, shall we....
Real world scenario, one I just looked at. Brand new build, so no maint or cap-x for years making #'s simpler to flesh out. $340k on buy, market rent's $2,700mnth. I know this is market rent because I already lease others at this in this community of this exact floor plan.
I have $32,400 annual revenue. Minus HOA, P.tax, insurance and all operational expenses I have $26,950 OR in % I have a 7.9% COC.... Already, without anything else, I just beat most everything in "the market"......
BUT, I ALSO get appreciation which assuming really long hold is 2.9% as shown as median as averaged out over many decades. That's another $9,860 in my pocket putting us now at 10.8% ROI.
But wait, it get's BETTER.... because rents are not static, rents go up at about 4.5% annual.....
It's laughable, LAUGHABLE, to try and compare index funds too REI.
And what does one do in an '08' style "collapse", duh, ya DON'T sell, ya RENT IT OUT! Because guess what happened in '08' when OVER-LEVERAGED fools were suffering there accountability of dumb financial actions? Yeah, they became TENANTS! Rents shot through the roof as the demand exploded! So hummm let's see, what to do what to do, rent's going up 20%+ annual OR I can sell at huge discount, what to do, what to do...... ya RENT it out! And within a few years, like magic all equity is back and then some.
And now biggest problem is the property is such a cash-cow that ya don't ever want to let it go.
And to answer your question, I'm here responding because I have purchased 7 properties in all cash over the years making my personal experience a perfect fit to answer this particular subject as I have first hand experience. What's laughable, I mean LAUGHABLE, is your theoretical example from the interweb when I brought receipts using my actual tax statements and 1099s.
Secondly, the OP or other questioner has expressed gratitude for my wisdom on this subject.
I notice in every thread you respond to, you brag about your own personal success in order to lift your fragile ego so I'll mention that I also recently purchased a condo with a 7.6% COC return in San Diego last year. But even at 10% with appreciation as you stated, that doesn't beat the 13% the S&P 500 did over the last decade. Sorry but 13% beats 10% even with the perks. What most don't realize is that 13% is compounding. Your cash on cash return does not compound. You realize that correct? It's always 7.9% on your principal no matter how much appreciation you gain, but the S&P 500 compounds. As you make an additional $25/year in rent appreciation, your HOA + Property taxes + maintenance + these new insurance premiums + lawsuit risks, will consume your $25/year increase. I know because I've owned a house for 20 years. I know macro economics is important so anyone can search the internet and come up with their own theories on the subject or a more favorable example and that's great, but this is just my personal experience. Your mileage may vary. But to call someone a troll is a cheap shot exposing your own inability to acknowledge others experiences and exposes your emotional maturity level. Reported!Since your (@KS) experience seems to be only in the world of "all cash buys", and not in the world of leveraged buys,...have you ever heard the expression" you don't know what you don't know"?
All cash buys are the will always give you your lowest return since the actual cost to the REI is just the cash they put in. If you pay all cash, you are paying full price for the property. If you pay with leverage, your total cost is only the down payment,...and the rest is paid buy the tenant...as long as you have positive cash flow. If you don't have positive CF, then the negative CF part is also cash contributed by the REI, which adds to the cost.
The main goal of the CF, is to recover your cost (the DP). Once that happens, and as long as you have positive CF, you have what amounts to a free property. The equity guild up, and added CF are your profit sources, which continue to add up. Remember, once you recover you cost (cash you put in), you have no money in the deal anymore, but you continue to benefit financially, even after you have no money in the game.
Now, how do you do that with the Stock Market?
Buy a $100k property, put down $20k, and your CF only needs to recover $20k. Buy $100 stock (or whatever paper you want to buy), you pay $100k for it. That means you dividends have to recover $100k (if the stock pays cash dividends). - Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes2y
Quote from @K S.:
Quote from @James Hamling:
Quote from @K S.:
Here's one youtube link of many showing that renting is better. Buying cash can only be worse considering that cash can be invested at way higher than the average rate of appreciation of 3%. But this question continues to be asked over and over again when it's a pretty simple answer. If you have the money and don't care that you'll lose 900k in a decade from not investing that cash into the market instead. Then buy cash. It's your money. I'm not saying to buy with a mortgage either as the video states, this is bad investment advice as well for the average american at this moment in time (unless you're starting a family and can afford it). Leveraging yourself could also take a lot of properties like 10? just to beat the market according to another video breakdown so I also don't trust the leverage guys. If you're the type of person that has to ask this question, then just put your money in the market and wipe your hands and be done with it. Try VOO (S&P 500) or similar dividend fund which doesn't make sense but some people like the psychological feeling of monthly "rent" like checks. And remember, you can average down during a 50% crash. But when real estate crashed 50% during the great recession, nobody averaged down, it's called foreclosure. And don't forget to max your 401k matching. I've already earned about 100k in just a few years of maxing with my employers 5% match. Don't fall for the RE hype.
Why are you here K S.? I mean, other than to Troll? I don't see anything but Trolling here and hilarious levels of misinformation.
How about a Reality Check, shall we....
Real world scenario, one I just looked at. Brand new build, so no maint or cap-x for years making #'s simpler to flesh out. $340k on buy, market rent's $2,700mnth. I know this is market rent because I already lease others at this in this community of this exact floor plan.
I have $32,400 annual revenue. Minus HOA, P.tax, insurance and all operational expenses I have $26,950 OR in % I have a 7.9% COC.... Already, without anything else, I just beat most everything in "the market"......
BUT, I ALSO get appreciation which assuming really long hold is 2.9% as shown as median as averaged out over many decades. That's another $9,860 in my pocket putting us now at 10.8% ROI.
But wait, it get's BETTER.... because rents are not static, rents go up at about 4.5% annual.....
It's laughable, LAUGHABLE, to try and compare index funds too REI.
And what does one do in an '08' style "collapse", duh, ya DON'T sell, ya RENT IT OUT! Because guess what happened in '08' when OVER-LEVERAGED fools were suffering there accountability of dumb financial actions? Yeah, they became TENANTS! Rents shot through the roof as the demand exploded! So hummm let's see, what to do what to do, rent's going up 20%+ annual OR I can sell at huge discount, what to do, what to do...... ya RENT it out! And within a few years, like magic all equity is back and then some.
And now biggest problem is the property is such a cash-cow that ya don't ever want to let it go.
Ah the classic troll accusation to bring more credence to your own argument so you don't have to bring as much substance to your own. Your excessive use of ALL CAPS shows your overly emotional investment to a very low stakes situation. There's no reason to talk down to people in every thread you respond to. I'm surprised you haven't been banned yet.
And to answer your question, I'm here responding because I have purchased 7 properties in all cash over the years making my personal experience a perfect fit to answer this particular subject as I have first hand experience and can provide actual value to the subject unlike you who constantly derails the integrity of every thread your respond to with your condescending attitude to others experiences exposing your immaturity level. What's laughable, I mean LAUGHABLE, is your theoretical example from the interweb when I brought receipts using my actual tax statements and 1099s.
Secondly, the OP or other questioner has expressed gratitude for my wisdom on this subject.
I notice in every thread you respond to, you brag about your own personal success in order to lift your fragile ego so I'll mention that I also recently purchased a condo with a 7.6% COC return in San Diego last year. But even at 10% with appreciation as you stated, that doesn't beat the 13% the S&P 500 did over the last decade. Sorry but 13% beats 10% even with the perks. What most don't realize is that 13% is compounding. Your cash on cash return does not compound. You realize that correct? It's always 7.9% on your principal no matter how much appreciation you gain, but the S&P 500 compounds. As you make an additional $25/year in rent appreciation, your HOA + Property taxes + maintenance + these new insurance premiums + lawsuit risks, will consume your $25/year increase. I know because I've owned a house for 20 years. I know macro economics is important so anyone can search the internet and come up with their own theories on the subject or a more favorable example and that's great, but this is just my personal experience. Your mileage may vary. But to call someone a troll is a cheap shot exposing your own inability to acknowledge others experiences and exposes your emotional maturity level. Reported!Sorry, it was just so much whining and crying about feelings that I just couldn't stomach getting through reading the entirety of the diatribe.
I am sorry that facts hurt you're ever so fragile feelings and pierce that paper thin skin.
Hey, maybe after your morning tofu and goat-yoga ya can hug it out in the afternoon feelings circle about the big bad meanie with math's and all will be well.
Not much else to say as you're CLEARLY focused on just trolling. Good luck with that.
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