Should you purchase your property cash?

[Nicholas Salman]

Let’s take a deeper look into investing for beginners.

“Should I buy my house cash?”

Depending on what your goals are this could be a necessary move or you will find there are better ways to leverage your capital.

Example: Say you are to purchase a duplex for $250,00”. If you are looking to flip and add value then purchasing cash or raising capital would most likely be your best bet.

However, if you are going the buy and hold strategy then I would look at the cash on hand and see if you can spread the down payments around to multiple properties. If they are good deals you will compound your cash flow by using that capital on multiple properties. Also don’t forget about the principal pay down/equity being built from your tenants 😀

A common way to calculate a good deal is the COCROI aka cash on cash return on investment. If you pay entirely cash for the property, you will obviously be cash flowing more monthly considering no mortgage payment. However that does not always mean that is a good deal.

Example: If you were to leverage $1000 to make $100 it makes more sense than leveraging $10,000 to make $100.

This is pretty basic and I could go deeper but for the sake of understanding what I’m laying down I kept it simple. Please reach out if you have any questions! By no means is this financial advice and I do not own hundreds of properties like others but the goal is to always help atleast one person 🙌🙌

[Tyler Solomon]

Might be biased here - but RE is a game of using leverage (debt) to your strategic advantage. If you have $500,000 for example, why by one $500,000 (ish) cash flowing property, when you could responsibly put 25% down (as long as numbers make sense/done your dd) and by 4 properties that will pay for them selves (ie using someones rent to build your equity). Unless you are extremely cash heavy and looking to deploy such, financing seems to make much more sense, especially for those looking to build / grow a portfolio. Informed use of leverage can rapidly change your financial success!