Question: Should I buy cash and then refinance?

Question

Has anyone had any luck negotiating a property down in price through buying all cash, then renting the property out and then refinancing?

Account Closed · Answer

@Rachel Heslep

I think that's a great strategy if you can refi and pull your original cash out. Like the other member mentioned, financing costs money so plan for it...especially if you escrow your taxes an insurance. I've found my lender fees to be anywhere from $1,500-$6,000.

Daniel Kong · Answer

@Rachel Heslep Yes for sure you can. But just be aware it will cost you around 500-700, and you will have to get another one done during the refinance- the lender will require it. Just another “double” cost if you pay cash then refi. As long as the discount for cash is big enough it will be worth it.

Rachel Heslep · Answer

@CJ M. thanks for sharing your typical lender fees!

@Daniel Kong you raise a good point regarding a lender being a protector for someone that doesn't have a ton of experience. However, even if I paid cash, I can still do my due diligence and get the appraisal to ensure it isn't a total flop - correct? I guess I'm struggling with knowing if it would make more sense to put all cash into something up front, or if it makes sense to just put down the 20% so that I don't have a large chunk of money tied up into something.

Daniel Kong · Answer

One of the things to be careful of though (especially if you are justing getting started), is buying a bad deal. When you purchase with a lender upfront,  the lender is your friend. They will force you to get an appraisal, and won't lend on a house unless its actually worth the purchase price. So they kind of protect a newer investor from making a really terrible purchase.

Daniel Kong · Answer

You will pay closing costs to the title company twice - that will typically be about 1-2k. But you only pay the lending fees once either way. That is usually the more expensive part. So you either pay the lending fees up front during the purchase or during the refinance. I don't see how it could be a 5k difference if you use cash up front. Maybe you will pay an extra 1-2k if you refinance after.

Rachel Heslep · Answer

@Tchaka Owen thanks for your input! Do you have any insight into how much a refinance will cost? For instance, is it a percentage of the total loan?

Tchaka Owen · Answer

@Rachel Heslep - that's beneficial if you can drive the price down enough to make it worthwhile. Remember that refinancing is not free, you will pay a number of thousands. So if you're going to negotiate down $3k so you can pay $5k to refinance, it's not worth it (unless the property is a must have). A possibility is to let them know you *can* buy cash but want to finance it. Or make it not contingent on financing but give yourself a long enough closing period to get the financing done. Good luck!

Question: Should I buy cash and then refinance?

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