Updated 29 days ago on . Most recent reply
Financing vs Out of Pocket
I'm 23 and currently building my first house, handling most of the work myself and paying out of pocket. I expect to complete it debt-free by next summer. I work in the oil field on a 4-weeks-on, 2-weeks-off schedule, with occasional 6-weeks-on, 2-weeks-off hitches when offered. My next project is to construct a fourplex with a small footprint, each unit being approximately 25x25 or 30x30. I'd love to hear your thoughts on funding it out of pocket versus pursuing financing, including the types of financing options available for a fourplex. What are the pros and cons of each approach?
Most Popular Reply
#5 Multi-Family and Apartment Investing Contributor
- Cincinnati, OH
- 3,641
- Votes |
- 3,953
- Posts
#5 Multi-Family and Apartment Investing Contributor
- Cincinnati, OH
@Kozmo Roehl, generally financing is only used because you are capital limited. If you have the ability to do it debt free, and don't have other deals to pursue then having the additional burden of a constant debt payment is a great way get things done.
Ultimately, financing vs cash is all about leveraging your capital. If you can earn more than your debt payment will cost, then it is worth financing. If you cannot earn more than your debt payment, by freeing up your capital to deploy elsewhere, then it is not worth financing, because you will be paying 7% interest for no reason.