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Sticking to Mostly Cash vs. Financing?

Haley Elisabeth
Posted

Hi all!

We are new to real estate investing. Currently we have a home improvement/remodeling company, so the construction piece we have including many sub crews. We are looking to add flipping houses and have been diving into learning all about this area of real estate.

Our main question is - why not use your own cash for flipping vs. financing? Then taking any cash made on that project, reinvesting it into the next, and growing cash reserved over time. We hear a lot about hard money lending, utilizing the BRRR method for holding properties, etc. But at the same time, we also hear story after story of the investors losing almost everything at some point or losing large amounts of money due to the financing.

Besides it being much slower start up to self-fund, why not use cash instead of financing to avoid the risk? Yes, there's still risk of losing some cash but at that rate you could just hold the property longer if needed. You're not worried about monthly interest payments, loan origination fees, etc. 

We are wondering if we are missing something here. Thank you so much in advance!

 

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