All cash or nah in Memphis
Most Popular Reply
Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votesThis time, let me try to give you an answer without the "clouds" in the way.
The bottom line is this...math.
1 - If you put $150k cash into a $150k property, and the property has positive CF, that property costs you $150k.
2 - If you put $150k cash into a $150k property, and the property has negative CF, that property costs you $150k...plus, all the negative CF...and is a bad deal.
3 - If you put $30k cash into a $150k property, and the property has positive CF, that property costs you $30k.
4 - If you put $30k cash into a $150k property, and the property has negative CF, that property costs you $30k...plus, all the negative CF...and is a bad deal.
...but,...
5 - If you put $150k into a property that only gets $1000/m in CF ($12k.yr), it will take you 12.5 years to recover your cost ($150k). That means you don't start making a profit until the middle of year 13...and that's a terrible deal.
6 - If you put $30k into a property that only gets $500/month in CF ($6k/yr), it will only take you 5 years to recover your cost ($30k)...and that's a great deal.
...further more...
7 - If you spend $150k on one $150k property all cash, you own $150k in property value. If your PV appreciates 10%, you only gained $15k in PV and free equity.
8 - If you spend $150k, $30k per property (DP), that's 5 properties worth $150k each, which means that $150k is now buying you $750k in PV, and that 10% appreciation will get you an additional $75k in PV, and free equity.
52 Replies
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
I highly recommend against using all your cash. Right now there is so much opportunity, don't handicap your buying power
- Contractor · Nashville, TN · Member since 2014 · 1k+ posts · 1k+ votes3y
Really by paying cash all you are missing out on is leveraging that same cash into more assets. Most of the time, this means is you could increase roi.
but paying cash has perks, so if maximizing roi isn't your top priority, nothing wrong with all cash. Less headache for sure.
- 3yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
Quote from @Nic S.:
I have about $150k to invest into my 5th property. I am leaning towards and all-cash buy in Memphis with a fantastic turnkey operator. My focus is on cash flow.
What am I not thinking about??
I am leveraged on the other 4 properties and like the idea of having a paid off asset.
Why do you want a paid off asset?
Why do you want to minimize the power of your cash?
Why do you want to lose money from the day you buy?
Why do you want to pay full price for your property, instead of having your tenant pay for the vast majority of it...for free?
Why do you want to buy your cash flow?
Why do you want to lengthen the time before you get profit?
Why do you want your $150k in cash to equal $150k in Property Value, when it could be worth $750k instead...from the start?
Why do you want to have the future percent appreciation applied to $150k in PV, instead of $750k?
Why do you want to start at a loss, and lose even more money exponentially starting from the day you close?Why, oh why?
- Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes3y
You could easily get into brrrr investing with 150k. Much more profitable than buying turnkey.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes3y
I definitely vote "nah". Probably the only chance I'll have this year to use "nah" in a sentence :)
How do you know it's a fantastic turnkey operator?
Skyline Properties A lot of questions here @Joe Villeneuve I'll do my best to answer them (if you are genuinly interested and not being rhethorical).
I am trying to cover my primary housing expenses with cash flow. If I can cash flow $1000/mo now off a $150K investment while interest rates continue to climb - 8% return now doesn't seem that bad to me.
- A paid off asset now doesn't always have to be paid off - perhaps I can refi or HELOC in the future
-Why do I want to lose money the day I buy? - Can you elaborate?
- I have 8 other units being paid off by tenants, I'm not opposed to the idea of having 1 paid off by me and taking longer to get my returns
- why do I want to start at a loss? Again please elaborate?
Quote from @Joe Villeneuve:
Quote from @Nic S.:
I have about $150k to invest into my 5th property. I am leaning towards and all-cash buy in Memphis with a fantastic turnkey operator. My focus is on cash flow.
What am I not thinking about??
I am leveraged on the other 4 properties and like the idea of having a paid off asset.
Why do you want a paid off asset?
Why do you want to minimize the power of your cash?
Why do you want to lose money from the day you buy?
Why do you want to pay full price for your property, instead of having your tenant pay for the vast majority of it...for free?
Why do you want to buy your cash flow?
Why do you want to lengthen the time before you get profit?
Why do you want your $150k in cash to equal $150k in Property Value, when it could be worth $750k instead...from the start?
Why do you want to have the future percent appreciation applied to $150k in PV, instead of $750k?
Why do you want to start at a loss, and lose even more money exponentially starting from the day you close?Why, oh why?
Quote from @JD Martin:
I definitely vote "nah". Probably the only chance I'll have this year to use "nah" in a sentence :)
How do you know it's a fantastic turnkey operator?
Years of references, referrals, and research by me and BP folks.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes3y
Quote from @Nic S.:
Quote from @JD Martin:
I definitely vote "nah". Probably the only chance I'll have this year to use "nah" in a sentence :)
How do you know it's a fantastic turnkey operator?
Years of references, referrals, and research by me and BP folks.
Then there's no good way to answer your question as it really depends on you. What @Joe Villeneuve was referring to here is really the velocity of money; you're taking liquid assets and concreting them into hard assets. If you're done with RE and have no further intention of growing, and are just looking for a place to park funds that might be OK but you look like a pretty young guy and you could make the same money create a ton more profit with leverage. Yes, you are already leveraged on the other properties, but bottom line is: a property that doesn't work leveraged (with reasonable interest rates) probably doesn't work at all, cash or not.
Skyline Properties - 3yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes...and that just about covers it.
Quote from @JD Martin:
Quote from @Nic S.:
Quote from @JD Martin:
I definitely vote "nah". Probably the only chance I'll have this year to use "nah" in a sentence :)
How do you know it's a fantastic turnkey operator?
Years of references, referrals, and research by me and BP folks.
Then there's no good way to answer your question as it really depends on you. What @Joe Villeneuve was referring to here is really the velocity of money; you're taking liquid assets and concreting them into hard assets. If you're done with RE and have no further intention of growing, and are just looking for a place to park funds that might be OK but you look like a pretty young guy and you could make the same money create a ton more profit with leverage. Yes, you are already leveraged on the other properties, but bottom line is: a property that doesn't work leveraged (with reasonable interest rates) probably doesn't work at all, cash or not.
- 3yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
This time, let me try to give you an answer without the "clouds" in the way.
The bottom line is this...math.
1 - If you put $150k cash into a $150k property, and the property has positive CF, that property costs you $150k.
2 - If you put $150k cash into a $150k property, and the property has negative CF, that property costs you $150k...plus, all the negative CF...and is a bad deal.
3 - If you put $30k cash into a $150k property, and the property has positive CF, that property costs you $30k.
4 - If you put $30k cash into a $150k property, and the property has negative CF, that property costs you $30k...plus, all the negative CF...and is a bad deal....but,...
5 - If you put $150k into a property that only gets $1000/m in CF ($12k.yr), it will take you 12.5 years to recover your cost ($150k). That means you don't start making a profit until the middle of year 13...and that's a terrible deal.
6 - If you put $30k into a property that only gets $500/month in CF ($6k/yr), it will only take you 5 years to recover your cost ($30k)...and that's a great deal....further more...
7 - If you spend $150k on one $150k property all cash, you own $150k in property value. If your PV appreciates 10%, you only gained $15k in PV and free equity.
8 - If you spend $150k, $30k per property (DP), that's 5 properties worth $150k each, which means that $150k is now buying you $750k in PV, and that 10% appreciation will get you an additional $75k in PV, and free equity. - Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes3y
I only buy with cash if the speed gets me a significant discount.
Plain vanilla no urgency no discount = mortgage.
- Real Estate Broker · Memphis, TN · Member since 2020 · 202 posts · 203 votes3y
Quote from @Nic S.:
I have about $150k to invest into my 5th property. I am leaning towards and all-cash buy in Memphis with a fantastic turnkey operator. My focus is on cash flow.
What am I not thinking about??
I am leveraged on the other 4 properties and like the idea of having a paid off asset.
Memphis local here (although this wasn't a location question). I'm sure you are capable of running return calculations with cash vs. leverage. I know a lot of people here will tell you to leverage because the overall return is higher, but if you're curious about having a paid off property, do it. From what I can tell from your picture you have decades of investing ahead of you. Most investors I know who have decided to go the "all cash" route have later leveraged their properties because they couldn't sit still. So, just because you buy with cash doesn't mean it is a forever decision. Sounds like a good time for you to itch your curiosity so you can know if it works for you moving forward. It's a one-way bet purchasing a property with cash.
Quote from @Nic S.:
I have about $150k to invest into my 5th property. I am leaning towards and all-cash buy in Memphis with a fantastic turnkey operator. My focus is on cash flow.
What am I not thinking about??
I am leveraged on the other 4 properties and like the idea of having a paid off asset.
All my deals are cash, as is ,this way you get a better deal. 10- 15% NET caps, then if you refi COC is much higher,
- 3yPatrick DruryBusiness MemberReal Estate Agent · Columbus, OH & Cleveland OH · Member since 2021 · 1k+ posts · 2k+ votes
@Nic S.
Stay leveraged. Don't use all your money to buy one property. There are already tons of threads about this discussion. - 3yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votesIn most cases you are an example of "stepping over a dollar to pick up a dime".
Quote from @Bob S.:
Quote from @Nic S.:
I have about $150k to invest into my 5th property. I am leaning towards and all-cash buy in Memphis with a fantastic turnkey operator. My focus is on cash flow.
What am I not thinking about??
I am leveraged on the other 4 properties and like the idea of having a paid off asset.
All my deals are cash, as is ,this way you get a better deal. 10- 15% NET caps, then if you refi COC is much higher,
Quote from @Joe Villeneuve:
In most cases you are an example of "stepping over a dollar to pick up a dime".Quote from @Bob S.:
Quote from @Nic S.:
I have about $150k to invest into my 5th property. I am leaning towards and all-cash buy in Memphis with a fantastic turnkey operator. My focus is on cash flow.
What am I not thinking about??
I am leveraged on the other 4 properties and like the idea of having a paid off asset.
All my deals are cash, as is ,this way you get a better deal. 10- 15% NET caps, then if you refi COC is much higher,
Nope I like having zero debt. If I choose to refi then my COC is much higher.
All the best
- 3yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votesThat means:
Quote from @Bob S.:
Quote from @Joe Villeneuve:
In most cases you are an example of "stepping over a dollar to pick up a dime".Quote from @Bob S.:
Quote from @Nic S.:
I have about $150k to invest into my 5th property. I am leaning towards and all-cash buy in Memphis with a fantastic turnkey operator. My focus is on cash flow.
What am I not thinking about??
I am leveraged on the other 4 properties and like the idea of having a paid off asset.
All my deals are cash, as is ,this way you get a better deal. 10- 15% NET caps, then if you refi COC is much higher,
Nope I like having zero debt. If I choose to refi then my COC is much higher. Having over 80 doors is not so bad with zero debt,
All the best
1 - You like losing money by leaving it on the table,
2 - You like to pay full price for a property (even if you get a deal, paying all cash is paying full price)
3 - Minimizing future appreciation gains by sticking all the cash in one property,
4 - Maximizing your exposure, and thus maximizing your risk,
5 - Lengthening the time it takes to turn a profit,
6 - Paying to have a tenant, instead of having the tenant pay you,
7 - Minimizing the value and buying power of your cash,
...there's more, I would have stopped at #1. - Memphis, TN · Member since 2022 · 230 posts · 99 votes3y
Hey @Nic S.
Here in the Memphis Market, I think there is still a great opportunity to purchase Turnkey using financing and still cash flow.
I would love to connect with you and tell you about a great financing opportunity with a local bank right here in Memphis.
I will shoot you a DM and hope to hear from you soon. Have a great day!
Quote from @Joe Villeneuve:
That means:Quote from @Bob S.:
Quote from @Joe Villeneuve:
In most cases you are an example of "stepping over a dollar to pick up a dime".Quote from @Bob S.:
Quote from @Nic S.:
I have about $150k to invest into my 5th property. I am leaning towards and all-cash buy in Memphis with a fantastic turnkey operator. My focus is on cash flow.
What am I not thinking about??
I am leveraged on the other 4 properties and like the idea of having a paid off asset.
All my deals are cash, as is ,this way you get a better deal. 10- 15% NET caps, then if you refi COC is much higher,
Nope I like having zero debt. If I choose to refi then my COC is much higher. Having over 80 doors is not so bad with zero debt,
All the best
1 - You like losing money by leaving it on the table,
2 - You like to pay full price for a property (even if you get a deal, paying all cash is paying full price)
3 - Minimizing future appreciation gains by sticking all the cash in one property,
4 - Maximizing your exposure, and thus maximizing your risk,
5 - Lengthening the time it takes to turn a profit,
6 - Paying to have a tenant, instead of having the tenant pay you,
7 - Minimizing the value and buying power of your cash,
...there's more, I would have stopped at #1.Leaving money on the table, never. All my purchases are always about 50% of the arv. Full price, sure if full price is 45k, with 10k in rehab and value is 125k, I will pay " full price" all day long, LOL. at 20% NET CAP its all good. I do not like debt, I like owning things outright. Maybe its because in my late 20s I had a 10k a month nut just to break even. Well, when things went south, it got ugly fast. So maybe this is my " fear" Cars, boats, personal home, and investment properties I like to own fee and clear. Having loans/ debt is not a bad thing IF you know how to maximize your returns. SO, one way is not right or wrong, just different,
All the best
- Real Estate Broker · Memphis, TN · Member since 2020 · 202 posts · 203 votes3y
Quote from @Bob S.:
Quote from @Joe Villeneuve:
That means:Quote from @Bob S.:
Quote from @Joe Villeneuve:
In most cases you are an example of "stepping over a dollar to pick up a dime".Quote from @Bob S.:
Quote from @Nic S.:
I have about $150k to invest into my 5th property. I am leaning towards and all-cash buy in Memphis with a fantastic turnkey operator. My focus is on cash flow.
What am I not thinking about??
I am leveraged on the other 4 properties and like the idea of having a paid off asset.
All my deals are cash, as is ,this way you get a better deal. 10- 15% NET caps, then if you refi COC is much higher,
Nope I like having zero debt. If I choose to refi then my COC is much higher. Having over 80 doors is not so bad with zero debt,
All the best
1 - You like losing money by leaving it on the table,
2 - You like to pay full price for a property (even if you get a deal, paying all cash is paying full price)
3 - Minimizing future appreciation gains by sticking all the cash in one property,
4 - Maximizing your exposure, and thus maximizing your risk,
5 - Lengthening the time it takes to turn a profit,
6 - Paying to have a tenant, instead of having the tenant pay you,
7 - Minimizing the value and buying power of your cash,
...there's more, I would have stopped at #1.Leaving money on the table, never. All my purchases are always about 50% of the arv. Full price, sure if full price is 45k, with 10k in rehab and value is 125k, I will pay " full price" all day long, LOL. at 20% NET CAP its all good. I do not like debt, I like owning things outright. Maybe its because in my late 20s I had a 10k a month nut just to break even. Well, when things went south, it got ugly fast. So maybe this is my " fear" Cars, boats, personal home, and investment properties I like to own fee and clear. Having loans/ debt is not a bad thing IF you know how to maximize your returns. SO, one way is not right or wrong, just different,
All the best
This is usually the case with this argument. One side is arguing with logic and one with emotion/personal anecdote. The all-cash buyer is aware of the lower returns but has a personal reason for doing so... and that should be the end of the argument.
- 3yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
Quote from @Reed Rickenbach:
Quote from @Bob S.:
Quote from @Joe Villeneuve:
That means:Quote from @Bob S.:
Quote from @Joe Villeneuve:
In most cases you are an example of "stepping over a dollar to pick up a dime".Quote from @Bob S.:
Quote from @Nic S.:
I have about $150k to invest into my 5th property. I am leaning towards and all-cash buy in Memphis with a fantastic turnkey operator. My focus is on cash flow.
What am I not thinking about??
I am leveraged on the other 4 properties and like the idea of having a paid off asset.
All my deals are cash, as is ,this way you get a better deal. 10- 15% NET caps, then if you refi COC is much higher,
Nope I like having zero debt. If I choose to refi then my COC is much higher. Having over 80 doors is not so bad with zero debt,
All the best
1 - You like losing money by leaving it on the table,
2 - You like to pay full price for a property (even if you get a deal, paying all cash is paying full price)
3 - Minimizing future appreciation gains by sticking all the cash in one property,
4 - Maximizing your exposure, and thus maximizing your risk,
5 - Lengthening the time it takes to turn a profit,
6 - Paying to have a tenant, instead of having the tenant pay you,
7 - Minimizing the value and buying power of your cash,
...there's more, I would have stopped at #1.Leaving money on the table, never. All my purchases are always about 50% of the arv. Full price, sure if full price is 45k, with 10k in rehab and value is 125k, I will pay " full price" all day long, LOL. at 20% NET CAP its all good. I do not like debt, I like owning things outright. Maybe its because in my late 20s I had a 10k a month nut just to break even. Well, when things went south, it got ugly fast. So maybe this is my " fear" Cars, boats, personal home, and investment properties I like to own fee and clear. Having loans/ debt is not a bad thing IF you know how to maximize your returns. SO, one way is not right or wrong, just different,
All the best
This is usually the case with this argument. One side is arguing with logic and one with emotion/personal anecdote. The all-cash buyer is aware of the lower returns but has a personal reason for doing so... and that should be the end of the argument.
No argument, just verifying the facts. Like you said, it's either logic or personal, or the way I would put it, math or emotions. Trouble is, when the choice is between logic and emotion, emotion usually wins the battle, but in the end loses the war.
- Agreed, but 20% + net is not so bad :)
Quote from @Reed Rickenbach:
Quote from @Bob S.:
Quote from @Joe Villeneuve:
That means:Quote from @Bob S.:
Quote from @Joe Villeneuve:
In most cases you are an example of "stepping over a dollar to pick up a dime".Quote from @Bob S.:
Quote from @Nic S.:
I have about $150k to invest into my 5th property. I am leaning towards and all-cash buy in Memphis with a fantastic turnkey operator. My focus is on cash flow.
What am I not thinking about??
I am leveraged on the other 4 properties and like the idea of having a paid off asset.
All my deals are cash, as is ,this way you get a better deal. 10- 15% NET caps, then if you refi COC is much higher,
Nope I like having zero debt. If I choose to refi then my COC is much higher. Having over 80 doors is not so bad with zero debt,
All the best
1 - You like losing money by leaving it on the table,
2 - You like to pay full price for a property (even if you get a deal, paying all cash is paying full price)
3 - Minimizing future appreciation gains by sticking all the cash in one property,
4 - Maximizing your exposure, and thus maximizing your risk,
5 - Lengthening the time it takes to turn a profit,
6 - Paying to have a tenant, instead of having the tenant pay you,
7 - Minimizing the value and buying power of your cash,
...there's more, I would have stopped at #1.Leaving money on the table, never. All my purchases are always about 50% of the arv. Full price, sure if full price is 45k, with 10k in rehab and value is 125k, I will pay " full price" all day long, LOL. at 20% NET CAP its all good. I do not like debt, I like owning things outright. Maybe its because in my late 20s I had a 10k a month nut just to break even. Well, when things went south, it got ugly fast. So maybe this is my " fear" Cars, boats, personal home, and investment properties I like to own fee and clear. Having loans/ debt is not a bad thing IF you know how to maximize your returns. SO, one way is not right or wrong, just different,
All the best
This is usually the case with this argument. One side is arguing with logic and one with emotion/personal anecdote. The all-cash buyer is aware of the lower returns but has a personal reason for doing so... and that should be the end of the argument.
- Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes3y
Quote from @Bob S.:
Quote from @Nic S.:
I have about $150k to invest into my 5th property. I am leaning towards and all-cash buy in Memphis with a fantastic turnkey operator. My focus is on cash flow.
What am I not thinking about??
I am leveraged on the other 4 properties and like the idea of having a paid off asset.
All my deals are cash, as is ,this way you get a better deal. 10- 15% NET caps, then if you refi COC is much higher,
With 8% rates? Sounds sussy.
Quote from @Account Closed:
Quote from @Bob S.:
Quote from @Nic S.:
I have about $150k to invest into my 5th property. I am leaning towards and all-cash buy in Memphis with a fantastic turnkey operator. My focus is on cash flow.
What am I not thinking about??
I am leveraged on the other 4 properties and like the idea of having a paid off asset.
All my deals are cash, as is ,this way you get a better deal. 10- 15% NET caps, then if you refi COC is much higher,
With 8% rates? Sounds sussy.
this is why we only deal in cash, But even still, 8% rate with 15% net ,still ahead of the game
Good Luck
- 3yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votesPercentages don't tell me anything of value. How do those percentages compare in actual dollars?
Quote from @Bob S.:
Agreed, but 20% + net is not so bad :)Quote from @Reed Rickenbach:
Quote from @Bob S.:
Quote from @Joe Villeneuve:
That means:Quote from @Bob S.:
Quote from @Joe Villeneuve:
In most cases you are an example of "stepping over a dollar to pick up a dime".Quote from @Bob S.:
Quote from @Nic S.:
I have about $150k to invest into my 5th property. I am leaning towards and all-cash buy in Memphis with a fantastic turnkey operator. My focus is on cash flow.
What am I not thinking about??
I am leveraged on the other 4 properties and like the idea of having a paid off asset.
All my deals are cash, as is ,this way you get a better deal. 10- 15% NET caps, then if you refi COC is much higher,
Nope I like having zero debt. If I choose to refi then my COC is much higher. Having over 80 doors is not so bad with zero debt,
All the best
1 - You like losing money by leaving it on the table,
2 - You like to pay full price for a property (even if you get a deal, paying all cash is paying full price)
3 - Minimizing future appreciation gains by sticking all the cash in one property,
4 - Maximizing your exposure, and thus maximizing your risk,
5 - Lengthening the time it takes to turn a profit,
6 - Paying to have a tenant, instead of having the tenant pay you,
7 - Minimizing the value and buying power of your cash,
...there's more, I would have stopped at #1.Leaving money on the table, never. All my purchases are always about 50% of the arv. Full price, sure if full price is 45k, with 10k in rehab and value is 125k, I will pay " full price" all day long, LOL. at 20% NET CAP its all good. I do not like debt, I like owning things outright. Maybe its because in my late 20s I had a 10k a month nut just to break even. Well, when things went south, it got ugly fast. So maybe this is my " fear" Cars, boats, personal home, and investment properties I like to own fee and clear. Having loans/ debt is not a bad thing IF you know how to maximize your returns. SO, one way is not right or wrong, just different,
All the best
This is usually the case with this argument. One side is arguing with logic and one with emotion/personal anecdote. The all-cash buyer is aware of the lower returns but has a personal reason for doing so... and that should be the end of the argument.
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