Buy with Cash or Finance?

Question

Hello All,

Quick background.. I started real estate in 2005, bought multiple properties (high-interest loans, arms, etc.). I had no idea what I was doing.. (was 21). Went through the recession and ended up short-selling my properties..

Faster forward to 2010 I obtained my real estate license and started investing again, but this time buying properties outright..

My passive income is 5k month and I have no debt..  I also have a full-time job in IT management

I live in a townhouse and have been saving up to buy a property for my growing family.. I have 3 kids (under 4) so as you can imagine living in a townhouse has been difficult.

I have $500k in liquid and have always had the mindset of buying my new primary residents using cash as I've been burned by loans in the past..

Recently, I started thinking this through a little more, and would like to put 20% down on a house and take the remainder and acquire more properties when the market drops..

My goal is to have 12-15k net of passive income..

What are your thoughts? What would you do? Appreciate everyone's help!

David Idi · Answer

I would do 20% down with a 15yr. Mortgage and invest the rest but keep $100K liquid.

Randy Janoe · Answer

Sounds like you know what you feel comfortable with, stick to it! I'm unsure what your typical rental price point is, but you could consider going out of market and buying inexpensive homes for cash.

For example I can go 3 hours away and buy outright for what a down payment would run where i live.

Steve Vaughan · Answer

I have paid off rentals, too, but finance my primary.

I like the 20% down to avoid PMI.   Primary res loans are the cheapest money out there.

If you plan to expand, buy a reasonable primary with 80% fixed financing.  Mine's on a 15 yr.  When I got it in 2012 15yr rates were 30% lower than 30 so at least check rate differences.

Congrats on having $500k liquid! How the heck did you do that??