College Student · Maumelle, AR · Member since 2016 · 13 posts · 5 votes
Hello,
After looking high and low, coming across deals that are under contract and in closing by the time I contact the real estate agent, I have found a nice duplex in a decent area for a great price. I have been saving my money since last year, incase an opportunity like this ever rolled around and the duplex is priced to where I can pay it all in cash. Does anyone recommend that I do this or should I go ahead and get financing?
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
9y
Congrats saving at a rate high enough to purchase your first plex outright, @Aliyah Conley! That's awesome!
I would finance if all things are equal, but pay cash for a discount. My LOI offer would have 3 scenarios with 3 price points; $x for cash, $x + x% with bank financing, $x + x+% for seller financing. All amounts would be specific, like $91,473. Don't use lots of zeros like $90,000.
I prefer to pay cash and refi after 6+ months. Delayed financing only gets you 70% of value back.
Will this be a househack or investment? I'd be more likely to pay cash if investment. Househack may only require a 5% down payment at an awesome fixed rate. Congrats again!
Residential Real Estate Broker · Paia, HI · Member since 2016 · 479 posts · 311 votes
9y
I'm going to chime in as a real estate broker. In my experience, banks don't typically discount their REOs as they're already priced below market, whether or not you offer cash. The misconception that cash elicits some discount in real estate is tenacious and unfounded in my market, and only true if the seller is desperate, the sale is time-sensitive (short sale), the property is not financeable or the appraised value is dubious.
I've worked with multiple sellers particularly on the high end who don't care if it's cash or not, they just want their price. They are perfectly happy to wait 60 days for loan underwriting for a full-price offer. Maybe this is only true in luxury markets?? I know nothing about how it works in Arkansas.
@Aliyah Conley congratulations on your offer! I would speak with a lender regarding obtaining a HELOC or refi prior to closing as it would be a big disappointment if you tied up all your cash and couldn't refinance . . . and I've seen it happen.
Investor · searcy, AR · Member since 2016 · 147 posts · 111 votes
9y
Aliyah Conley I personally see no benefit in paying all cash, even if you get a 10% discount, all of your money may be tied up in this one property. If you can pay 15%, financed out over 20 years+, you potentially buy 3 of these deals with the cash you have in hand. Money tied up in one place is never good. Of course this is just my investment strategy.
You said it was an investment property, but are you planning to buy and hold or flip it?
Paying all cash for a buy and hold could take you forever to get the cash you have in hand now, back out of it.
China, ME · Member since 2014 · 3k+ posts · 4k+ votes
9y
I'll respectfully disagree with the "no benefit to cash" statements.
When I'm representing a seller, we LOVE all cash deals, because it eliminates the whole underwriting process.
That's where deal get wrapped around the axle - borrower's DTI changes before closing, property appraisal comes in low, property is with 300 feet of a gas station (yes, that's a real thing with FHA), sudden unrelated expenses come up during underwriting and borrower has insufficient cash on hand to close, down payment cash is gifted from a source the lender won't approve of (think close friend, second cousin), cash gifts are not seasoned, FHA/VA/USDA appraiser sees peeling paint, broken window, crumbly steps, etc., not to mention that it also eliminates the financing contingency.
A cash buyer eliminates all of those landmines, making it a MUCH stronger offer than one with financing, even if the all cash offer is somewhat lower.
WorldWide · Member since 2016 · 1k+ posts · 1k+ votes
9y
"It is a duplex surrounded by 4 other duplexes on the same side (1 rented, 1 just purchased yet vacant, 2 vacant - boarded up, maybe to be foreclosed on soon) ."
What's your plan with this? How much rent (vs market) would you be able to pull having this kinda surrounding? Are you sure the area is really "decent"? Did you drive around at night, talk to neighbors, etc.? Not to mention any kind of work that needs to be done to this property to bring it to rentable condition. I'd think twice before dumping all your savings into this one.
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
9y
@Aliyah Conley When buying a foreclosure the path of least resistance is definitely to buy it cash especially if you will not be occupying the property. The only other option you have a non-owner occupant would be hard money/private money. Save the cost of money and buy it cash, rehab it, and then refinance and get your cash out.
Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
9y
Take a look at your long term goals and work backwards. If you are looking to buy properties slowly and own them free and clear, then your current approach could work fine. If you are looking to accumulate properties quickly but have less cash flow, then financing can be an option. It really comes down to your own goals.
New Haven, CT · Member since 2016 · 90 posts · 99 votes
9y
I don't understand why some people are so opposed to leveraging your money. Why not just make two offers for a cash deal/financing deal and see what they say. I would include in your offer, proof of funds to show if need be, you have the entire amount in cash to purchase the property, and get a guarantee from your lender that you can close in 30 days.
Then at least after you close, you don't have to wait 6 months to get 70% of your cash back. You can go right back into another deal. Potentially get a few more in the meantime.
College Student · Maumelle, AR · Member since 2016 · 13 posts · 5 votes
9y
@Matthew A. Thanks for your input. I have never thought about doing it like that. I'll keep that in mind for future reference, thank you. Have you had any experience doing this before? Did they typically choose your cash offer or your financing offer?