Contractor · South Vienna, OH · Member since 2019 · 41 posts · 22 votes
So I’m currently in the market to purchase my first rental property, and I’ve been brainstorming for good ideas and I remember Dave Ramsey saying that he buys all his properties with cash which allows him to offer way less than market value and people are more willing to accept because the closing is so much quicker and easier.
So if I could borrow the cash from my parents to purchase out right then turn around and refinance after the deal is closed then give them the money back would that be a smarter option than obtaining the loan before I make the deal?
Except that DR isn't right. Those properties where cash gets you a lower asking price are few.
Now the real bad news. The total cost of a rental property to you is what comes out of your pocket...as in your cash.
Assuming you have $100k to spend. Answer the following 3 questions Question #1: You have two options to make an offer on a property (or properties) where the AP is $100k. Which use of funds option costs you more money? A - Pay all cash and get the AP down to $90k. Cash Flow = $10k/year
B - Pay using 20% down payment. Cash Flow = $20k/year
Question #2: Which use if funds option returns your cost the fastest?
Question #3: Which use of funds option is the most profitable?
Hey @Nick Cooper. Not everyday we see someone from South Vienna on here. I grew up in South Charleston. In Columbus now. Looks like @Tim Delaney got you the answer you need. Feel free to reach out if you need anything or want to connect.
I have and always will believe in taking advantage of leverage in real estate. You can own real estate for only 20% down and let the tenant buy down the mortgage and build equity, or you can tie all your money up in one property.
I know a person who owns 3 rentals, ranging from $150k - $200k. All 3 were purchased in cash and she doesn't wish to refi because she doesn't want to deal with loans/leverage. The idea of going from 3 to 10 properties is possible for her in just a few months, but she's not taking advantage of leverage.