Cash vs. finance on buy and hold

7 Replies

Hello all,

I am looking to purchase my first buy and hold property in the Orlando area and was hoping to get some opinions/advice. I am searching in the 130K to 150K range and I have the ability to pay cash. Does it make more sense to pay cash and then mortgage the property or is financing it up front a better option? From what I have researched, I will have more leverage on pricing with an all cash offer, but is the difference worth the additional fees, closing costs, etc. if I have to turn around and mortgage the property? Any input would be appreciated. Thank you.

John 

@John D. , if you're going to finance it (later) anyway, why should that cost you more in "additional fees, closing costs, etc", than getting it financed before closing?

Or, are you also questioning (like the thread title suggests): why finance it ever?

[On the pay-cash-first idea, you already summarized the pros well]. Welcome to BP...

@John D  Some time property is not in livable condition so Investors do buy in cash or buying cash give them more equity in house because of cash buyer.  If this is not scenario in your case, you should purchase with finance because make no sense paying double closing cost. 

Harjeet Bhatti, Lender in IL (#230554)
+18479628229

One consideration is how competitive your market is. My market is hot right now especially for investments. Cash is king here and you might have a hard time competing for the good deals if you are using financing. If you plan on using financing anyway, take advantage of the Delayed Financing exception and you can pay cash up front and get your purchase price + closing costs back relatively quickly as long as the deal is good enough. 

Thank you all for the feedback. @Rashad Luckett  I had not heard of the delayed financing exception. I will definitely look into that option. 

It's best to take advantage of a wholesale priced property and get it rent-ready, then re-finance to the max LTV and do it again! Makes no sense to get all your capital tied into 1 property with the ability to pull it out (plus the cash on cash ROI will be extraordinarily higher on a mortgaged property)

@Chris Grenier Thanks Chris. That is the strategy I am looking into. I'm still in the process of building my team, but that seems to be the best option for ROI. Ultimately, my goal is to obtain multiple buy and holds for long term growth. Any suggestions for locating such properties? I read about Home Path for foreclosures, but I am a little concerned about major rehabs being out of state and new to real estate investing.

REO’s are nearly impossible to get at good prices anymore, the inventory is so low that when one does pop up it has a ridiculous amount of offers from every angle.

Don’t be afraid of a rehab if you have a good crew and pieces of the puzzle organized, the only way to really get a good deal in this market these days without spending $25K a month on Seller Marketing is finding a fixer upper (wholesale usually).

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