Finance or buy cash?

5 Replies

I'm looking at my second property and am meeting with my realtor on Friday to write an offer.  It's a duplex and I'm going to offer $30k.  I walked through with my contractor and he foresees $25-30k capex to get the property to be a quality property.  

My question is should I finance the property and pay cash for the improvements and then try to refi again after its finished and rented? Or should I just skip the step, and buy it with cash and pay for the upgrades and then do a cash out refinance at the end to take out 80% of the ARV equity? I figured that I would save $ in bank fees doing it the second way.

If the bank does not finance it the way it is, than you have no choice but to pay for it  all cash. 

As to how much money to take out?  It depends how much can you rent it out for?

This is what I would do. If I can rent it out for $600 a month, I want my payment to be no more than $300. You will avoid much financial stress.

Finally, If you can pay for it and have paid off...that is even a better deal.

Best wishes to you.

I talked to a lender, and they will finance the purchase, but I would have to pay for the renovation out of pocket.  Then I would have refi to cash out afterwards.  My thought is that I could just skip that step and refi at the end when it is completed.  I'm trying to list pros/cons to capitalizing the project both ways.

Kevin, Can you share an update on what you ended up doing with this duplex? I'm trying to make a similar decision and would like to hear any thoughts you have.  


@Kevin S. Doesn't make any sense to finance the purchase if you have the cash available and are going to need to refinance after the rehab anyways. Why pay 2 sets of closing costs, docs, etc?

Thanks for sharing @Brian Garrett.  I understand that perspective on paper, but I was wondering what Kevin D had experienced and if he learned something.

Since you shared, I'll direct the question to you..  If i have the ability to finance TWO properties around the same time, instead of buying one cash, can you share your opinion on why i would only buy one property in cash?  I'm trying to get perspective on this, so thanks for sharing.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here