Benefits of using cash buyers

1 Reply

Hey Guys! 

First time poster here. I had a question about the benefits of cash buyers for flip properties. I'm looking at different ways to fund new projects, and I've heard about the strategy of finding a cash buyer to pay for the property in cash, then I do the work, and we split the profits. That way there's no debt to worry about, but we both profit. We can do like a 70/30 split, where I get a finder/management fee of 30% of profits and the cash buyer gets 70% since it was their money. It would minimize risk, but I can still profit by just doing the part I'm good at.

Is this a common practice? What are the pros and cons of this strategy? Also, if it's possible to totally cash-fund the entire purchase and rehab debt-free (this guy has some big pockets for sure), is that better than taking on debt in the form of a loan?

Thanks guys,

You're all champs

I would say that's pretty common practice. Many of the "no money down" real estate investing books talk about using another financier to fund deals. It's the "none (of your own money) down" approach.

The split is always different, and it's all about what you agree upon. I would think to ask for closer to 50/50, 40/60--many cash buyers will use their own hard money lenders or private lenders, someone is in-debted to someone else. But if we're talking to someone with enough cash to bankroll a project, it's would be better than taking a loan--saving the interest. I would structure a partnership though, just in case something doesn't go your way.

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