Help/advice on first time purchase on property with cash

24 Replies

So my friend and his family own a very successful construction company. They have a piece of property they are going to sell to me for 60k to live in. I’ll get the deed then go get a HELOC and they will do all the work to fix the place up through the HELOC. My issue is my 60k is all cash I’ve literally saved for 15 years of landscaping with my family, graduations, casino wins holidays, just all around extra money that doesn’t come from my actual job that I’ve had forever. Even though they think that me paying them that much cash should be ok and nobody will say anything since they go through a lot of money, I was just wondering what is an alternative that will give me peace of mind knowing everything I’ve saved for years and years doesn’t get taken away. Can’t they just sell me the property for dirt cheap and I can just pay them the cash and they can do what they want with it? I know there’s gift tax you have to pay as well if you sell a house for $1 so can’t I just give them the money for that as well? They paid 60. The building is worth 82 and the total value with the land is 147.

This is Literal Cash that I’ve saved for years and years anytime I gotten paid from my other job landscaping every summer. ( I was paid in cash ). And also like I said graduations, holidays, casinos, anything that I didn’t need to put in the bank to pay a bill was put to the side as a nest egg in case something ever happened with banks. I’ve lived off my regular job that I’ve be working for 14 years and well I guess my egg got pretty damn big after so long. I’ve had steady income for 13 years and the only bill I pay besides a phone bill or subscription things is my car payment I’ve had since 2011. I’ve lived at home since and don’t have any business or other properties that I profit from in anyway to show suspicious activity. And yes some of the cash I saved came out of my direct deposit check when I’d withdraw cash from and add to the pile so who’s to say I didn’t do that for 13 years until it just accumulated to what I have now? Any advice is appreciated. My options would be to the one I stayed above or go hey a loan for 60k which I think is fairly easy for me and just pay them in cash to do all the work to the property. Would that be better?

Any help or advice is appreciated. Thanks.

This is a very interesting scenario.

They are selling you the property for 60K and then you are getting a HELOC (how much?) and they are going to do the repairs for you. Is that correct?

Are you going to live in the property or rent or flip?

Have they told how much the repairs will cost?

Is there anything in writing at this time?

How well do you know them?  

As the buyer, you should write the contract (offer) and make sure you have a professional on you side.

@Blake Willis , by asking: "Can’t they just sell me the property for dirt cheap and I can just pay them the cash and they can do what they want with it?", are you trying to ask: 'Why don't they sell me the property for $60k INCLUDING their labor and materials?" (Otherwise, I don't know what you were trying to get at). 

My answer to that question would be: Why should they?

On the other hand, you say: "The building is worth 82 and the total value with the land is 147".

If you're asking if you should pay all of $60k for it, my answer is: If so, why haven't you said "yes" already?

I'm curious about this HELOC you're talking about. Would this be against your CURRENT home?

In which case, why not pay the $60k for the property directly from that HELOC, instead of your own cash?

THEN, you can pick and choose the projects and the pricing that you'll pay your cash for, and the amounts.

But if you're talking about an ELOC against the property, why not instead, apply for a normal 25% deposit loan?

Big question: What do you believe it'll be worth (and why), AFTER all the work needed is done? 

(Sorry if I misinterpreted your comments). All the best...

I’ve known this family forever. They build houses among other things. It will be 60k. That’s what they paid long ago. Like I said it’s worth 147k. Building is 82k. The write up for repairs they did comes to 100k but they over shot a lot of things. This is a 3200 sq ft one floor area the owned for all their supplies and tools and needs a complete haul over. They are building a new building closer to them so they were talking about selling it for 80 until I asked about living there. I plan on living there and yes it will all be residential. There isn’t any permits or things like that. Once the sale is done it’s a residential property. They wrote up a sales agreement for 60k and I would lease it to them for 500 dollars a month while they do the process of cleaning out all of their things. Those few months of money would just go toward fixing it up anyway. The plan was to sell the place, get the deed and get a HELOC and they do the work and that would be my monthly “mortgage” since I’d already own the place.

In reply to Brent. 60k is what they are selling it to me for. Like I said that’s what they paid long ago and yea the 147k is from this years county tax assessment page. I do not own a home sonit would be me getting this property and the deed. Then going to the bank and saying hey I have a house I would like to fix up and then I use that property as my home equity. The prob is the cash situation and if any red flags raise from the transaction of me getting the property. From what my friends that work at banks around here say, The bank isn’t going to care if I already own it and just need a HELOC. I’m talking about using my saved up cash to make the buy with this family.

@Blake Willis , you wrote "yes it will all be residential", but, is it ALREADY zoned residential?

If not, how will you GUARANTEE immediate change of zoning, which will need City approval.

Have you DEALT with City planners before?

And the way you worded "The bank isn’t going to care if I already own it" does NOT seem correct to me.

Have you DEALT with Banks before?

Even if you pay all-cash, they'll likely make you wait at least 6 months, if not a year, before they approve a HELOC!

Just sayin'.

From any meetings I’ve had with the company they said everything is fine as far as no need for zoning, permits, etc. that has nothing to do with it. They only thing I needed advice on was about how to pay for the place when I can just buy it outright but if you see my first post all my money saved up doesn’t look legit from a far. I don’t have that much in my account. Including CD’s, savings, and a LOC with another bank I could prob round up 15-16K. That’s why I was asking if me buying from them directly is going to cause a reg flag or does me getting a mortgage for 60k and paying them for the work in cash sound better? We were just trying to avoid closing fees and all that when I’m able to just do a cash buy so they suggested that, but they didn’t realize it was literal cash at the time. They and my account said it should be fine and very slim that something happens just because I don’t really pay any bills and had w2’s and the same job for over ten years, but I was just branching out to get advice from others and stumbled upon this site.

Any banks I’ve talked to from people I know that work there or have gotten HELOCs said it takes about a month but mortgages take a little longer sometimes. I’ve never had any of that. I got personal loans and a new car payment and those obviously only took like a week to get done. I know this is a much bigger situation

Originally posted by @Blake Willis :

From any meetings I've had with the company they said everything is fine as far as no need for zoning, permits, etc. that has nothing to do with it. They only thing I needed advice on was about how to pay for the place when I can just buy it outright but if you see my first post all my money saved up doesn't look legit from a far. I don't have that much in my account. Including CD's, savings, and a LOC with another bank I could prob round up 15-16K. That's why I was asking if me buying from them directly is going to cause a reg flag or does me getting a mortgage for 60k and paying them for the work in cash sound better? We were just trying to avoid closing fees and all that when I'm able to just do a cash buy so they suggested that, but they didn't realize it was literal cash at the time. They and my account said it should be fine and very slim that something happens just because I don't really pay any bills and had w2's and the same job for over ten years, but I was just branching out to get advice from others and stumbled upon this site.

I'm sorry, but in your first post you said "my 60k is all cash I’ve literally saved for 15 years of landscaping"... 

But now, you're saying "Including CD's, savings, and a LOC with another bank I could prob round up 15-16K". Sheesh!

However, if you ARE hiding $60k under your mattress, how BETTER to invest it? [Why concern over ~$3k closing fees?]

That is cash I have saved is what I’m
Afraid may look suspect from a far because it’s never been banked. I saved it. I Have money that’s been in the bank forever and that’s the 16k that would be needed for a mortgage down payment/closing cost when they need everything sourced. I’m asking for the best way to go about this deal. Sorry if confused. Long story short, I’d rather just buy the place out right with a cash deal with no bank. then fix it up through a bank with a HELOC, but I was asking for advice on the best way to do that or if getting a mortgage with my bank money (16k) is better and just paying the construction company cash for supplies and labor to fix up.

@Blake Willis , every time I deposit $60k cash in my bank, no-one asks where I got it from.

It's time for it to see the light of day.  It's time - to become a regular citizen. Cheers...

I would think after 10k that becomes an issue ha. I’ve been a regular citizen for years who just saved side money his whole life. Yes I would love to put it into a house of my own but was concerned about being hassled about it since it’s just a chunk of money out of “nowhere” to them 

@Blake Willis , sometimes, "issues" won't be as bad as you might think. You could ASK them "what if", right?

Originally posted by @Brent Coombs :

@Blake Willis, sometimes, "issues" won't be as bad as you might think. You could ASK them "what if", right?

True but they will 100 percent have to report it. Like I said, my accountant says this will prob go unnoticed just for the fact 60k isn’t much to them in the big picture, and it’s not like I’m using this property to make money from it. It’s just to live. Also for the fact that I’ve been a Normal on the books working citizen forever and have all the w-2’s. My first car payment started in 2011 and I’ve been at my job since 2005 or so and still there all while living at home with no major bills besides the car and credit cards. It’s just the thought of losing my money I saved forever that scares me. 

@Blake Willis , "It’s just the thought of losing my money I saved forever that scares me" sounds like a very good excuse to me for you to have been "hiding" your savings. But now, it's time to get real, right?

Originally posted by @Brent Coombs :

@Blake Willis, "It’s just the thought of losing my money I saved forever that scares me" sounds like a very good excuse to me for you to have been "hiding" your savings. But now, it's time to get real, right?

I suppose huh? Well over on reddit in the real estate section, pretty much everyone said “nooo do not do this deal because of the risk, irs, etc. Then one of those people sent me here and I’m kind of getting the opposite response so it’s like ahhhh lol

Personally, I like cash. ;-} It might be a problem for the "Friends" company as well. IF you have time, you can split the deposits into 2 different accounts (checking and Savings) at 3 different banks. Make deposits of $5k over several weeks then move them over to 1 account. Then you can write a check for the house (easier for both parties) Should not have any issues (red flags). My other business does 95% cash (no, it's not drugs)  and by using different banks, I have a great relationship with several different bankers.

Another option is the put down 10% and finance (about $1300K) Use the cash to pay the company for rehab and make your payments. When you are done with the rehab, you can REFI and pull the equity back out. Now you can look for another property.  Good Luck!

Originally posted by @Guy Yoes :

Personally, I like cash. ;-} It might be a problem for the "Friends" company as well. IF you have time, you can split the deposits into 2 different accounts (checking and Savings) at 3 different banks. Make deposits of $5k over several weeks then move them over to 1 account. Then you can write a check for the house (easier for both parties) Should not have any issues (red flags). My other business does 95% cash (no, it's not drugs)  and by using different banks, I have a great relationship with several different bankers.

Another option is the put down 10% and finance (about $1300K) Use the cash to pay the company for rehab and make your payments. When you are done with the rehab, you can REFI and pull the equity back out. Now you can look for another property.  Good Luck!

Their company has no problem with taking the 60k and giving me the deed. They were just looking out for me on my end since it’s a saved money and not exactly showing A source. So doing what your saying will not get flagged for any type of structuring? Or is that just multiple deposits from one bank?  

If cash is an issue, there are ways to handle that legally. If not an issue, pay with cash. It might be prudent, however,to meet with a real-estate attorney to review the contract(s). Small expense to make sure you are getting what the verbal agreement stated.  

Originally posted by @Guy Yoes :

If cash is an issue, there are ways to handle that legally. If not an issue, pay with cash. It might be prudent, however,to meet with a real-estate attorney to review the contract(s). Small expense to make sure you are getting what the verbal agreement stated.  

There’s no issue with any agreement or anything like that. The only issue in this whole deal is my 60k raising any type of red flags and the best way to go about paying them. Like I said they will take the cash and give me the deed no problem and they will be fine on their end. they were just worried about me and looking out. If you read anything above you’ll know I’ve said They think I will be fine but you just never know when an audit may come, and like I said my account think it’s fine too but I just came here for advice ( advice not from people taking my money no matter how close we are) on the best and safest way to get them this literal cash without any issues on my end. 

PS I appreciate all the feedback from everyone. First time on here and I’ll stay coming back for more advice in the future if I need it. 

@Blake Willis , I'm sorry, but "they will take the cash and give me the deed" sounds EXACTLY what a scammer would tell you. I'm not saying they are - but what if THEY were duped by the Seller who "sold" to them?

eg. What TYPE of Deed? eg. A Quitclaim Deed can be USELESS! Use a Real Estate Attorney! (Not of the seller's choosing). 

My other concern is: Why such PRECISE "The building is worth 82 and the total value with the land is 147" figures?

ie. In reality, it's only worth: what someone PAYS for it! (And even then, maybe it's NOT!) Take care out there...

Originally posted by @Brent Coombs :

@Blake Willis, I'm sorry, but "they will take the cash and give me the deed" sounds EXACTLY what a scammer would tell you. I'm not saying they are - but what if THEY were duped by the Seller who "sold" to them?

eg. What TYPE of Deed? eg. A Quitclaim Deed can be USELESS! Use a Real Estate Attorney! (Not of the seller's choosing). 

My other concern is: Why such PRECISE "The building is worth 82 and the total value with the land is 147" figures?

ie. In reality, it's only worth: what someone PAYS for it! (And even then, maybe it's NOT!) Take care out there...

 I know your just looking out, but they have owned this Building since 1990. They just put a roof on it s few years ago. Yes everything else needs work inside and they are going to do that which is why they only asked for the same price they paid for it long ago. Like I’ve stated before, they aren’t asking for my cash, that’s all I have and would like to use it if it wasn’t going to raise any red flags. That’s why I suggested getting a mortgage and paying them in cash for the work which I just ran by them this week and they are going to get back to me. And once again those numbers are from the PA county tax assessment website. To be even more precise I just lifted this from the site for 2017 full base market value 

Land Value$65,400 Land Value
Building Value$82,000 Building Value
Total Value$147,400

@Blake Willis , for your information: "county tax assessment website" = "next to useless for practical purposes".

Seeing as you're asking for advice, and getting it, are you going to TAKE any of it?

Originally posted by @Brent Coombs :

@Blake Willis, for your information: "county tax assessment website" = "next to useless for practical purposes".

Seeing as you're asking for advice, and getting it, are you going to TAKE any of it?

Well that’s why I’m here. No matter how close I am with somebody, when there’s money involved I’ve seen how people act. Friends, family, or strangers. Basically I should talk to a real estate attorney, City planner, get an appraisal, and not worry about the IRS or any red flags when depositing 60k into an account like it’s nothing.

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