Buy with cash then refinance later or lock in the mortgage first?

[Tom J.]

Hi Everyone, I am planning to scale up buying properties to rent.  I have enough cash to purchase several outright, but would like to eventually pull out equity to then buy more properties.

I want to ask.  Is it better to just pay cash, get them rented, then refinance?  Or get a loan from the start?

[Jeff Dulla]

@Tom J. I know you are probably looking for a more simple answer but it depends. I would think while rates are still historically low, you want to leverage while you can and save your cash. Eventually, maybe soon, rates will be at a point where it will not be as advantageous for you to finance them. 

It also depends on each property. If you can get a property that is truly undervalued because of structural or safety issues that may impact financing, I would think you may want to use your cash towards those up front, fix the issues, and then get your cash back out. But if you find a property that seems pretty straightforward, just finance the purchase. 

Lastly, most of the time you do a cash offer, you are really removing your mortgage contingency but can still enter verbiage allowing you to obtain financing. In order to aggressively get a property under contract, you could also offer cash, knowing you will pay cash worst case, but in the meantime start the process for loan approval.