Buying homes for cash

133 Replies

@Bruce Woodruff ... your red flag comment I would not usually comment on. 10yrs I ran my own HVAC business with only one call back and one complaint to BBB, and that was due to a person bitching that I wouldnot come fix an issue with a thermostat that an home inspector stated the emergency heat did not work. He was trying to sell his house, and I has elderly and pregant women without A/C on 90+ days with high humidity, and they get priority with me. And due to my heatload calculation, drafty windows, and poor infiltration, i had installed long range registers and a lower kilowatt heater so the heater would run with the heatpump and not just as emergency heat, and not kill her electric bill. This would have killed the draft-chill in that house.  I customed designed all my hvac system with custom duckwork that I created from flat sheet metal and a metal-break on-site. I also put stickers on my unit and before I knew it, the lady who bought the house called the number on the unit and I went down to her house to see what the issue was. They seller had called another HVAC person to satisfy the insepector to sell the house as fast as possible, and the buyer paid for it service call. He replaced a brand new thermostat that I installed with another one and wired up the thermostat in correctly and disconnect the electric heat and put it on the emergency heat to make the inspector happy. 

That inspector did not know what emergency heat was. When I arrived to house, I explained to new owner that her thermostat did not need to be replaced and she was charged unfairly for something she did not need, that I would rewire it correctly and not charge her a dime for service call. 

Normally I would not respond to a comment like this, but it just validates everything I have been saying in this post. Your red flag is your assumption. My skillset in HVAC gave me 10years as a service tech, and if anyone thinks the customer is alway correct, maybe the real question is how does a customer believe that a HVAC inspection only takes 10 minutes. Your funrnace has to run steadily for 15minutes to get proper reading, your Heatpump takes 20 minutes before the pressures stablize. So when your HVAC is out the door in 10 minutes, and this is normal to you, then you question when a tech comes in and does a real inspection. Plus working in Northern VA as a service tech, you deal with very "I know it all" mentality in exspensive areas. And your comment is exactly what I have been saying about assumptions, being off topic, and pushing whatever agenda. My skin is thick, pierce at it at you will. lol

And thank you for making my comments valid.

Originally posted by @Kiel Martin :

@Moises B. Thanks for this information, now I have to ask, if I am going through a realtor, will i have to worry about wholesalers. I do not have wholesalers in my thought process, but would like to know who wholesales could affect me. If you have time, please elaborate. Thanks in advance if you have time. 

Hi Kiel,

If you are going through a real estate agent, then no, you are not working with a wholesaler. Therefore, you don’t have to worry about it. I purchase cash properties as well. I purchased my first couple of properties for $25-30k and haven’t had any problems renting them out since I screen my tenants pretty well. I self manage my properties and plan to until I purchase my first apartment building. I plan to own my own property management company to accompany my rental business so I like the experience self managing provides. 

To answer your original question, I pay around $700 for closing cost (sometimes less), doesn’t include title insurance or property taxes since they can vary.  It really depends on the area and the price of the home (for title insurance and property taxes) because the rest of your closing costs are mostly fixed rates (For example, attorney’s fee ~$350, title search fees ~$150, recording fees~$60, etc). You can look up the property taxes of the properties to get an idea of what they will be. 

It would be great for you to add an experienced real estate attorney to your team just in case you run into properties with title issues or just to handle your deeds and settlement. It just removes things from your plate and let’s someone with the knowledge and experience handle it so you have more peace of mind. It doesn’t cost a lot. I pay my real estate attorney $350 per closing to handle the deed, recording, hire the title company and closing. He’s done several closings for me. 

Wishing you the best! Congratulations on getting started. 

@Stone Jin , all that information is great. And after 5year (2027) I will be looking with what I got. So if I had 5 houses by then, being in $5k a month total, and I want $10k a month to retire, then I am half way there. I can continue on and finish with owning 20 houses with $20k a month. Worst case, my houses only bring in $10k a month, leaving me with income when I finally decide to retire in my mid 60s.  If I decide to go a different route, i can sell and use the money to buy better houses. Either way, I have to start some where, and I will be start with low income.  And your post hit right on the money of my one of my varibles. thank you

@Steve Vaughan , I had not intentions on buying an entire block, did you do this? That would be interesting to say the least. Not soemthing I would do, becuase rebuilding an entire block in Baltimore does not mean it is now a better block. It takes one corner to cause issues, and this is a people business, regardless how others percieve it. I am going to look up the buying block thing, just to see what it is like.

@Kiel Martin ,

Everyone starts somewhere.  When we started 5 years ago, everyone told us just to sell quickly and get out!   Now those people are saying we were "visionaries" in beating the market. 

We have done your exact model $15K-$40K cash plan (actually, ours range from $8K-53K, majority $25-35K), and it absolutely CAN work, but I'd say it's a unique model--- but doesn't work for 95% of people.    It's VERY sink or swim, and high majority of the people sink-- hence why everyone is telling you NOT to jump in.  Remember it's not just the purchase price, it's the renovation that will cost a lot more and come with surprises!    You ready to replace that main water  line for $4K-$6K, it might be coming-- and you might not really know it until you get someone in there.

You will be buying someone else's problems,  and you'll be fixing slumlord's shady fixes for a while...  so just go into realizing, it's a not a "steal" or some amazing deal, it's $15K because that's all the market says it's worth--period, because it needs a ton of work!

If you buy on the $15K, expect to put that $25K+ into rehab.. if you buy on the $40K side, you'll be buying likely a more solid home needing a lot less.    Most people here are just advising you to spend $$$ so it's less of a rehab, which is great advice!    We are working on a duplex now, got it for $15K, and you better believe we're at the $28K renovation cost now, rent will be $675/side, so it's worth it.. but i can't imagine if it was my first, whew-- all these giant renovation costs, it'd be insane if it was my first!

You got to know the streets-- talk to people, locals know which streets are good/bad,  all your potential tenants will have heard of an area...   it's better to know stuff that's good/bad ahead of time!

Another tip for warzones, instead of going for higher rent for your first one (if someone is desperate because of evictions/felonies/etc-- they will pay, but will likely trash it)-- focus on renting it for less than market,  and find a better quality long term tenant.    We have a house in a d-/drug area, and rent to someone on  disability/SSI-- for the right price, you can find the right person!     It's a win-win, everyone needs a home!

PM me if you need any advice!

Hate to break it to ya, but 15-40k won't take you far in real estate with that kind of business model. If you buy a house in that range for cash, you are looking at C-/D areas. Plus the property will likely be in bad if not unlivable conditions. You'll have to spend a ton just to bring it up to code and make it livable. Plenty of people with a lot of experience have made valid points about why this is a poor business model. It would be wise of you to acknowledge this instead of getting overly defensive.

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.

Sounds like if anyone can make these inner city BLT work you can.. Good luck with it.. and Debt free is for sure the way to go on these assets I would NOT borrower against them.  continue on your 20 year plan add them as cash allows end up owning a bunch free and clear over time.. dedicate your life to managing them ( full time job ) and you will do fine.

Originally posted by @Kiel Martin :

@Bruce Woodruff ... your red flag comment I would not usually comment on. 10yrs I ran my own HVAC business with only one call back and one complaint to BBB, and that was due to a person bitching that I wouldnot come fix an issue with a thermostat that an home inspector stated the emergency heat did not work. He was trying to sell his house, and I has elderly and pregant women without A/C on 90+ days with high humidity, and they get priority with me. And due to my heatload calculation, drafty windows, and poor infiltration, i had installed long range registers and a lower kilowatt heater so the heater would run with the heatpump and not just as emergency heat, and not kill her electric bill. This would have killed the draft-chill in that house.  I customed designed all my hvac system with custom duckwork that I created from flat sheet metal and a metal-break on-site. I also put stickers on my unit and before I knew it, the lady who bought the house called the number on the unit and I went down to her house to see what the issue was. They seller had called another HVAC person to satisfy the insepector to sell the house as fast as possible, and the buyer paid for it service call. He replaced a brand new thermostat that I installed with another one and wired up the thermostat in correctly and disconnect the electric heat and put it on the emergency heat to make the inspector happy. 

That inspector did not know what emergency heat was. When I arrived to house, I explained to new owner that her thermostat did not need to be replaced and she was charged unfairly for something she did not need, that I would rewire it correctly and not charge her a dime for service call. 

Normally I would not respond to a comment like this, but it just validates everything I have been saying in this post. Your red flag is your assumption. My skillset in HVAC gave me 10years as a service tech, and if anyone thinks the customer is alway correct, maybe the real question is how does a customer believe that a HVAC inspection only takes 10 minutes. Your funrnace has to run steadily for 15minutes to get proper reading, your Heatpump takes 20 minutes before the pressures stablize. So when your HVAC is out the door in 10 minutes, and this is normal to you, then you question when a tech comes in and does a real inspection. Plus working in Northern VA as a service tech, you deal with very "I know it all" mentality in exspensive areas. And your comment is exactly what I have been saying about assumptions, being off topic, and pushing whatever agenda. My skin is thick, pierce at it at you will. lol

And thank you for making my comments valid.

 See, this is where none of this makes sense. If you have this kind of experience and skills at HVAC, you would be *far* better off owning your own HVAC company than trying to own a low-income housing provider company. You are trading one job for another job; if you think you're going to be retired and not going to work any more with D class housing, you are fooling yourself.

The amount of money that can be made by a good HVAC company right now, like other professional trades (plumbing, electrical, etc) is off the charts. If you have any skills at building a low-income housing real estate "team", then those same skills should allow you to build an HVAC team, applying your attention to detail that you've mentioned and professionalism to a field that's in massive demand. 

There is an area about 1.5 hours from me where you can still buy fixer uppers from $10-35k. Sure I could buy a few for cash, fix them up, and they’ll never ever be worth what I’ve put in. Not to mention 3 bedroom houses rent for $600. Even during the early 2000’s they weren’t worth anything.

Tread lightly my friend.

@Linda S. Now this is a post that is a bonus. Thank you so much. I always prepare for the worst, but preparing does nothing when the problems occur. However, it does set expectations, which was already set by me. I got into the HVAC field for this purpose as well. HVAC at the time I was thinking of doing real estate, was the one field that was $10k plus, and originally I was going to do the repairs. This was many years ago. I have changed from that approach and this is a 20year plan to build the retirement. So info like you is definately appreciated

@Shawn Bhatti , what is with everyone. Not to take it personal, but people live in these areas. Good people who are just trying to work, each, and have a place to live. Becuase you and others cannot see these people as human, that is on you. It is people business, and there are plenty of good people in baltimore who are just good people working day by day. The bottom line is the so call mentally of low income is ignorant theives and bumbs, you guys are trying to put foot in your mouths. It is simple math. Fine areas poeple want to rent, buy and fix the house to a standard where people want to live, find good tentants, learn from it, and move to the next. My mission statement is my mission statement. When I want to know about my business model, i will ask! For now, stop tell me what will not work. it was funny at first, but I did not ask for a business model. I asked about closing cost. 

Whatever agenda some of you have about why my plan will not work, keep it to yourselves. 

@JD 

@JD Martin , did you even read what I said. I clearly stated that I ran my own HVAC company. let me find it for you. "

"When I opened my HVAC business, I opened it unconventionally and was able to close it debt free with my unconvnentional ways."

 Seriously, are you trying to pick an argument with me? Is this how you help? Because your not. Now I am taking it personally. Enough is enough. Lay off, I am doing the mission that i am doing. 

Originally posted by @Kiel Martin :

@JD 

@JD Martin, did you even read what I said. I clearly stated that I ran my own HVAC company. let me find it for you. "

"When I opened my HVAC business, I opened it unconventionally and was able to close it debt free with my unconvnentional ways."

 Seriously, are you trying to pick an argument with me? Is this how you help? Because your not. Now I am taking it personally. Enough is enough. Lay off, I am doing the mission that i am doing. 

 Well, as the British say, "Good day to you Sir". 

@Matt M. Might not be worth it to you, but it is $600 a month I did not have. The value of that house to me is $7,200 a year and closer to my $10k a month goal. Your plan is not my plan, and my mission is more than a dollar bill. Sorry you and others cannot see pass numbers and money. But what I see is people and i have lived a hard life and know what it is like to have nothing and just needed to find a place. I have been homeless, and worst. I have my mission, and my plan. So everyone get over it. 

On the other hand, those who tried to help me with information, I have already learned for you new things. Making this site worth it. 

Also, for the others, you have shown me how dealing with others in this field will be. And I have to say I am not impressed. I expect more from people claiming to help. Was it help that you were going for or just a bunch of "do NOTs". Eitherway, someone of you need to learn how to help better. You might got realestate down, but are far from successful with helping others. I have zero tolerance for people being pushy and i will push back when need be. 

"I do not use other people's numbers to tell me what works. I use my experience, good people, action, history

That's not a great position considering you appear to have no experience with real estate investing. You have no action or history with buy and hold rentals. If you think you're going to reinvent the wheel in D class neighborhoods I wish you the best luck. Like others stated (experts in this business) it won't be easy in 2021. You can learn a lot in the forums and nobody is trying to kill your dreams. Stick around and learn some more before buying cheap $40K properties.  


It's hard to collect rents in these lower priced homes nothing personal against any of the type of people whom live in that area. I have bought homes in C minus areas for cheap and I do not own anymore but one that I am trying to sell. You get all sorts of problems, one big issue I always get is when you are trying to rehab people break in and steal/vandalize or when sitting vacant people break in and use as a hang out. Also its hard to find a qualified tenant the can pay the rent and onetime. I do agree with some others  that it's better to take the money you want to use to pay in cash and get a better product and use that as the downpayment. If you go the cash route then buy only one first and see how it goes. Don't be dumb like me and buy a bunch without testing and then realize its a nightmare. There are some very experienced people on this site and most are saying it not going to work the way you think it will and I respectfully agree. However good luck and I hope you do well

Some good advice on this thread.  You're a novice, and you shouldn't be buying the very low end properties.  Those properties usually need lots of physical work, plus they are in challenging areas.  Use all that money for a downpayment on one good property.

@Kiel Martin

Not trying to be confrontational at all, more-so just curious as I love the low class c space. You mention retirement in x years, what's your plan for that? What is the ultimate disposition of your acquired properties?

I'll 2nd someone else who said to learn to do your own title work on these very low value assets. If your county recorder has records online, pull those, make sure whoever is on the last warranty deed is who is selling to you, verify no liens like mortgages or municipal fines/water bills, verify no other encumbrances through the city, county, etc. Do a survey if its customary in your area and affordable. If everything checks out just have an attorney draw up the deed and record it yourself. Unless you are doing multiple deals a month the time spent isn't going to be excessive.

I’ve been reluctant to reply to this thread because the op has been rather combative with other posters, even posters that have been podcast guests. You should give respect where respect is due. With that being said, I’ve had success with properties sub 40k that I purchase in cash. I’m about to hit the 5 year mark of buying them and am cash flowing about 3k a month after expenses. I now have an income stream I can fall back on should I lose my 9-5 job. I don’t regret taking the path I have because for me it was the only path. My debt to income ratio was too high to buy B class properties, so rather than going back to watching dancing with the stars I started buying distressed D and C class properties in cash and placing Section 8 tenants in them.

My advice is to buy in the outskirts of a rough area rather than dead smack in the center, at least in the beginning. My first purchase was for 18k and was near a highway exit on a street with only four other houses. Buying on the outskirts allows my tenant to avoid most of the headaches of the inner city. I still have that same tenant today, it’s been a cash cow and an anchor for the rest of my portfolio.

One of the hard things about buying cash properties in the manner discussed is that you run out of money pretty quickly, you have to be creative to keep buying. Heloc on primary, unsecured loans, Home Depot credit cards, 401k loans/hardship withdrawals, student loans even. You have to come up with the cash somehow when you burn through your initial hoard. I started bringing on partners because it was a lot easier to come up with half the purchase price and renovation than the whole purchase. One of my partners was someone that reached out to me from BP. We’re now buying properties out of his heloc, pretty sweet deal for me and for him too, I might add. He would have never reached out had I been combative in the forums like you have been. Much of the advice I received in the forums in the early days was discouraging. I’m glad I was persistent because the 20k houses with a 15k rehab are now all worth north of 60-70k. But I learned from others, even those that didn’t agree with me.
If I choose to I can now transition into a higher asset class. Some say investors buy D, then C, then B, then A class. My foundation has been D class. It’s hands on and a lot of work. You need an incredible handyman and rehabber. I bought one of these cheap properties and moved my handyman/rehabber in. He was previously couch surfing and down on his luck. I spotted his talent early on and got him vested in my business. We’ve formed an interdependent relationship with one another. I pay his phone bill and I gave him a 3k truck to drive. I completely control his expenses, so he is loyal to me and he picks up my phone calls. You need a supportive spouse if you are married and you need to network with other investors. Focus on your mental and physical health. Buying in the inner city is a lot like Mel Gibson in the movie Braveheart. That scene where he is on a horse coming down the hill after his wife is murdered. He’s calm, with his hands up, but then you see his eyes!!! Sure fire determination. Crazy eyes even. No fear.

Shout out to @Steve Vaughan , I’ve followed him in the forums for many years. Reading his advice to myself and others has been instrumental. And @Jay Hinrichs convinced me years ago that these properties are best owned in cash. I look after a couple handfuls of these now and they are all owned outright. I sleep well at night, even during a pandemic, not having to worry about making a payment to a lender should a few go vacant all at once.

Also, @JD Martin is not wrong in his posts. Learn what you can from others. It’s good to play devils advocate. The pitfalls with this class of real estate are many and it takes a special type of motivated person to be successful. This type of investing is not for the weak of heart, you must constantly remind yourself of your why and surround yourself with positive people. If I could have started out with B class properties I probably would have.

Oh, and to answer your original question, on 20k properties bought in cash the closing costs are nominal, maybe $400. At least in Wichita, KS.