Buying homes for cash

133 Replies

Hello all. I have never purchased a house and I am about to. I plan on purchasing rental properties with cash from $15k to $40k. What I was curious about is the closing cost of these types of homes, is it really on 3%. The homes that I am catering to is outside the city, but not denying myself to inside the city. Also, any advice for investors in baltimore would be great. I am new to all of this so any advice is appreciated. 

Originally posted by @Kiel Martin :

Hello all. I have never purchased a house and I am about to. I plan on purchasing rental properties with cash from $15k to $40k. What I was curious about is the closing cost of these types of homes, is it really on 3%. The homes that I am catering to is outside the city, but not denying myself to inside the city. Also, any advice for investors in baltimore would be great. I am new to all of this so any advice is appreciated. 

 $15-40k in cash? Hello 2015 🤣  You're talking either severely depressed areas, war zones, or houses that just about need demolishing for that kind of money in 2021. Use the money as your 20% on a better quality home - you'll never be sorry you did.


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I would talk to your Mortgage broker and title company. In talking with my MB he said that on the lower priced properties they may have a minimum charge for certain aspects of closing. 

@Nicholas L. Total purchase price will be $15k to $40k. I am loooking for houses where I do not carry a mortage, which is the foundation of my business I am starting. This is why I was curious about the 3% for closing cost for those price ranges. I have a huge feeling it will be alot more than 3% for these prices.

@Nick Cresci , thank you.... the minimum cost comment is what I needed to know. And talking to a title company in my area is also what I needed to know. 

@JD Martin , I will be doing my business in baltimore and I will not be following the standards of buying houses with a mortage. I see no reason to carry a mortage where they are thoussands of houses which can produce a positive cash flow without holding a liablity on top of that with a mortage. This is a unique busines plan designed by me specifically carter to my income. I buy, I hold, i rent out, have a property management company handle renters, and move on to the next. I got 20 years to do this before I retire and this is my starting year. The plan will be revisted after holding 5 houses. I will not be relying on renters to purchase my properties, they will be free and clear before having tentant step foot in the property. Baltimore is it own entity as far as cities go, and my business plan is far from the normal teachings which realestate is taught. Aslo, thank you for responding, very helpful and appreciated.

@Bruce Woodruff , there are prices like that i baltimore, but there are caveats to them. If I wanted to do section 8, this could be an issue with deing with baltimore's section 8 representatives. Also, you are putting up a lot of capital and baltimore changes block by block. Comps are not something that I use, I use the concept of "Can I get a tentant to live here" with having a low vacancy. This is by using people who understands the zipcode differences, and this is a big deal to me. No point of buying a $25k house, put $15k+ in the house and cannot rent it or sell it.

So there is trust in people that I will be using and with my previous businesses that i have own, the risk is there when trusting others. So as I start this, I have to manage my risk toward those I choice to trust, because every thinks they know, and I for one know that i do not know, which keeps me learning.

Originally posted by @Kiel Martin :

@Nick Cresci , thank you.... the minimum cost comment is what I needed to know. And talking to a title company in my area is also what I needed to know. 

@JD Martin, I will be doing my business in baltimore and I will not be following the standards of buying houses with a mortage. I see no reason to carry a mortage where they are thoussands of houses which can produce a positive cash flow without holding a liablity on top of that with a mortage. This is a unique busines plan designed by me specifically carter to my income. I buy, I hold, i rent out, have a property management company handle renters, and move on to the next. I got 20 years to do this before I retire and this is my starting year. The plan will be revisted after holding 5 houses. I will not be relying on renters to purchase my properties, they will be free and clear before having tentant step foot in the property. Baltimore is it own entity as far as cities go, and my business plan is far from the normal teachings which realestate is taught. Aslo, thank you for responding, very helpful and appreciated.

 I started out buying cash houses. I bought my first 4 or 5 houses all cash. But that was when $40k bought you a dump that could be turned into something nice.

I don't want to discourage you from getting started but I'm here to blow holes in your business plan:

1. Any house you find in Baltimore for $15-40k is going to be in a ghetto or destroyed and is going to cost a ton of money to get rent-ready, even for C-D class tenants.

2. You are never going to find a property manager that is going to deal with C-D class tenants, and if you did they would want a significant amount of your gross to do it. Managing C class housing and below is not for the faint of heart and it is a boatload of work.

3. You don't have to worry about getting mortgages because no one is going to give you a mortgage on anything you find in this price class. You will never refinance out of these properties either most likely. You will have a very narrow exit plan because you will struggle to find anyone to take these houses off of you when you get sick of working for free.

If you go the route you are suggesting I predict you will either find nothing to buy (if you look in decent areas) or, worse, will end up buying crack houses in war zones that will bankrupt you. Baltimore is one of the highest crime cities in the US and it's no accident they have buckets full of houses for $1000. 

Originally posted by @Kiel Martin :

Hello all. I have never purchased a house and I am about to. I plan on purchasing rental properties with cash from $15k to $40k. What I was curious about is the closing cost of these types of homes, is it really on 3%. The homes that I am catering to is outside the city, but not denying myself to inside the city. Also, any advice for investors in baltimore would be great. I am new to all of this so any advice is appreciated. 

$15 to 40K properties?  Actual closing costs are truly the least of your worries. I don't mean to be a downer, just more of a realist. If you've never purchased before and aren't a seasoned investor or even local to the Baltimore area, I can't emphasize enough how much of a potential disaster you are stepping into. 

@JD Martin , team is already develop. Like I said, it is baltimore, and its own enity. And the ghetto is not a fear of mine nor will it be a concern of mine. Like I said, I am not following the traditional ways that is wrriten. When I opened my HVAC business, I opened it unconventionally and was able to close it debt free with my unconvnentional ways. Convincing me about Class C&D and about $15k-40k types of houses is not going to sway me. Nor is telling me baltimore is the highest crime city. I live here and fear is does not motivate me to not accomplish. I spend time understanding and making things work instead of talking about why it will not work. 

This is a plan, not a wish, and the plan is develope, along with a management company in place. Baltimore changes block by block and certain zipcodes work why certain do not. And there is tons of houses on both list, which each will be anaylzed and tentants screened. No difference than any other business here. Thanks for the adivce, but that is why I have a business plan, which will be adabpted when needed. It was created from experience and research. Now it is time to execute. And like any scale, it is adjustable. As of now, those are the targets, and I was concerned about the closing cost having a set minimum rate which surpassed 3%, which some one here was nice of enough to answer.

I do not use other people's numbers to tell me what works. I use my experience, good people, action, history, momentum, and a strong foundation to make business decisions, always ahave. There are reasons for my choices. And if I had a nickle for every time someone told me how failure was my destination....... well brother, i would have over 100million nickles. 

Everyone thank you for all your advice. 

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Keil,

This is an excellent strategy. I have done this and now I have no day job.

I don't have mortgages. My house throw off tons of cash and now are collectively worth over 2 million dollars.

I find motivated sellers or distressed properties or both.

I just bought a condemned house for 12k negotiated a mortgage payoff of 10k. When my contractor is done in a few weeks I will have a like new house for a fraction of its ARV. I could probably sell it for 150k when done.

The real beauty is my ROTH IRA owns it (and others) and all the money it makes in appreciation and rents will be tax free for the rest of my life.

You can find deals in up and coming areas. They are not typically on MLS or Zillow and you have to do a little work to find them.

I'll keep buying distressed properties for cash all day before taking out a bank loan on a pretty retail priced house. 

@Kiel Martin to answer your overall question, closing costs are usually 2-3% of purchase price and can vary. Given that you plan to purchase using all cash, you're mainly paying attorney and escrow fees. If you planed on using a mortgage, your closing costs would also include loan originations fees, appraisal and survey fees, title insurance, property tax, and escrow fees. As others have stated, the likelihood of obtaining a SFH below 40k is practically impossible. I would highly advise using leverage to obtain rentals.

The ones who are advicing me not to move forward with my plan....... which one of you invest  in low income housing? Which one of you live in baltimore? Which one knows the area? 

I know what i know and I do not know what i do not know. I use others to give me ideas of what I do not know, but i worked very hard to get a base captial and now I am going to use that capital to learn the ends and outs of real estate. And I will be doing it without  caring debt. Like I have always done successful in the past. Every person who has spent time explainging to me why I should cary debt, has never been able to convince me. When I buy a car, I do not have a car payment. I leave debt where it belongs. In somebodyelse's lap, and not mine.

And because of that, I have been able to do some great things in my life, and now moving on to the next. Sorry to disapoint. But nobody is convincing me to carry debt. It has never made since to me and never will. It is a starting business, and I am not buying homes so I can take out debt on my homes. 

Originally posted by @Kiel Martin :

@JD Martin, team is already develop. Like I said, it is baltimore, and its own enity. And the ghetto is not a fear of mine nor will it be a concern of mine. Like I said, I am not following the traditional ways that is wrriten. When I opened my HVAC business, I opened it unconventionally and was able to close it debt free with my unconvnentional ways. Convincing me about Class C&D and about $15k-40k types of houses is not going to sway me. Nor is telling me baltimore is the highest crime city. I live here and fear is does not motivate me to not accomplish. I spend time understanding and making things work instead of talking about why it will not work. 

This is a plan, not a wish, and the plan is develope, along with a management company in place. Baltimore changes block by block and certain zipcodes work why certain do not. And there is tons of houses on both list, which each will be anaylzed and tentants screened. No difference than any other business here. Thanks for the adivce, but that is why I have a business plan, which will be adabpted when needed. It was created from experience and research. Now it is time to execute. And like any scale, it is adjustable. As of now, those are the targets, and I was concerned about the closing cost having a set minimum rate which surpassed 3%, which some one here was nice of enough to answer.

I do not use other people's numbers to tell me what works. I use my experience, good people, action, history, momentum, and a strong foundation to make business decisions, always ahave. There are reasons for my choices. And if I had a nickle for every time someone told me how failure was my destination....... well brother, i would have over 100million nickles. 

Everyone thank you for all your advice. 

 Before I give you my last bit of hard love, let me preface by saying I hope you succeed beyond your wildest dreams. I would love for you to come back here in 5 years to show us your portfolio of $15-40k homes and help others understand what you did.

Now, that said: I believe this is a train wreck in the making. Why? Well, I'm just going to quote from your post:

1. "I have a business plan, which will be adabpted when needed. It was created from experience and research." No it wasn't. Your very first post indicates you have never bought a house before. You have no experience, period, any more than driving a car qualifies you to be a mechanic or an automotive engineer.

2. "I was concerned about the closing cost having a set minimum rate which surpassed 3%"  You have so little experience you don't even know what costs will be included in closing and how much you can expect them to be. Answering you with a percentage makes no sense because there are a lot of possible items that can be included in closing costs. After you have bought several homes, you will start to have a pretty good idea what's going to be included in your area.

3. "I do not use other people's numbers to tell me what works. I use my experience, good people, action, history, momentum, and a strong foundation to make business decisions" Not in this case. You have no experience, have no idea if this "team" you put together is worth a plug nickel since you've never done any homes with them, have no home buying history to speak of, no momentum since I assume you haven't bought anything yet, and a very weak foundation of no properties and a thought that you are going to go into Class D housing and make a killing despite not even knowing how much you need for closing costs. 

I sincerely hope you prove me wrong, since I suspect you are the type to burn the house down anyway despite the fact that you're standing inside it. But I honestly feel it would be irresponsible to not point out that what you are proposing is a great way to lose all of your money. There's nothing wrong with owning homes for cash - I own a bunch of them outright - but what you are proposing is like getting your learner's permit and then signing up to drive the Indy 500.

I'm going to link @James Wise here because he's done this kind of thing probably 100 times in Cleveland, and he would be a good resource for you if you are hell-bent on the course you want to take. Good luck!




@Kiel Martin

Dude, I gotta admit that at first I just laughed off your crazy idea. But now, after reading your posts and feeling your determination and spunk, I am rooting for ya...wish I lived closer, I would come help just for the fun of it. Keep us informed of your progress (or even lack thereof).

And please read JD Martin's posts a couple more times. He is absolutely spot-on.

Best of luck, you can't stop someone who keeps on comin'.....

If you have not lived in or are familiar with the Baltimore market it would be very difficult to give sound advice. Most of the advice discouraging investing due to the price of homes, class level, or crime is misguided. It might sound unbelievable if you are in LA/SF/NY, but there are “turnkey” properties in the $40k range. Even with vacants, the equity you build into it can be refinanced out (my strategy), or you can just the accept the cash flow. 

If you are not here on the ground you don’t understand what “block to block” means. Due to the abundance of C/D class opportunities, there is an abundance of property managers to manage these properties. Might take work to find the right one lol. 

As far as financing, to reach their own. I know successful investors who leverage and I know plenty that don’t. Do what makes you money and checks the boxes of your game plan. Good luck. Shoot me a message if you ever want to talk Baltimore real estate. 

Originally posted by @Kiel Martin :

@John Underwood, thank you for that response. Very much appreciated.

 Sometimes I do my own title research and if it looks good, I type up my own deed, have seller sign it at the bank where it can be notarized and file it with the Register of Deeds. Done.

I have bought a house for cash in one day.  If its a super deal I'm not waiting for a week to have a closing. I have a simple Quit Claim Deed my attorney blessed that I use.  

Stuff I buy typically has a payback from between 1 to 4 years. 

Nicer houses I fix and flip.