Cash Only

9 Replies

I was reading "The Book on Flipping Houses" and I am very curious why you wouldn't use cash to fund your flips. I could see financing deals while starting out but if you had enough cash to run the business without borrowing any money why would you choose not to? In the book J Scott talks about lender fees and Mortgage payments which total $4500ish/deal just to make the deal. I am super new to this. Am I missing something here? Could you go into detail why you would choose financing over using cash for your flips. Thanks

Brian,

Welcome to BP. 

My guess is that many people do not have cash to fund their flips and when you start to expand your number of flips, most people will run out of cash at some point.  I use cash when I have it and tap lines of credit as needed to fund my flips.  My philosophy is that I would rather put the cash to use than pay interest just as you have already alluded to.

Chris

Thank you! Yes I agree, but I guess if you are doing 3 flips a month it would take a lot of cash. However, if you built your business a little slower you could save more of your profits and eventually use cash for everything. Again I am new so for those who are more experienced than me. Why would you choose to not use your cash?
I use cash and do one at a time. But it always seems an awesome deal comes along while I am cash strapped. So I guess there is the flexibility issue

growth is the reason people like to avoid cash

Makes sense. Trade off a little profit in order to grow faster. Thanks everybody.

nothing wrong with OPM if the interest rates are attractive. Then your cash is free to do other deals 

I guess my biggest concern is the risk of borrowing. For people who have flipped before, what would be the absolute worst thing that could go wrong in a deal that would leave u stuck paying back a loan on a deal?
Valid point! Thanks for all the advice!

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