Use Cash for Primary House OR Buy Rental w Cash to Pay for House

[Hunter Young]

My dad has $250k in cash and was planning on building a forever home.

He came across the idea to instead take out a loan to build his house and buy rental properties with cash which will end up paying for the loan with cash flow. He lives in rural Oklahoma which has cheaper home

Values.

He is interested in having his money working for him instead of just having only a house in exchange for it.

I think it’s a good idea and the upside is much better than the downside if proper due diligence is performed.

He is the type to do any repairs and manage the rental(s) himself. I don't think he would want to BRRRR the initial rental and start an investing career. He is mainly looking for cash flow and to get a "free" house.

Is this a good strategy?

What are the biggest risks?

What kind of loan do you need to build a house?

[Tyler Peitzmeier]

Hello Hunter,

There are a lot of great questions here. First, your dad should determine how much level of risk he is willing to take on. If he is willing to take on some risk with purchasing some rental properties, then he should absolutely do it.

I feel that purchasing more properties is a great idea. That will allow your dad to take advantage of more appreciation from more properties and create cash flow to pay of the loans and then some. 

The risks would be in not being able to find tenants for the properties so they just sit and among other things as well. 

There are many loans he can get. Finding a good lender will help him find out what will work best on what he is looking for.

I hope this helps!

Tyler