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Len & Leslie Marma's Blog

By Len & Leslie Marma | Agent in Marshfield, MA

Cash is King in Homebuying

Cash is king in homebuying -- By Judy Martel · Bankrate.com

The market for investment homes is picking up, and more than half the buyers these days are coming to the table with cash.

Rock-bottom prices are attracting investors who want to diversify their portfolio with real estate. For those who have a choice of paying by mortgage or cash, which is the better option? The scarcity of home loans these days means that paying cash not only leaves more room for negotiation with the seller, but a smoother and cleaner buying transaction. And if the goal is to rent out the property, the absence of debt means more income in the investors' pockets.

Investment real estate on the rise

Investment real estate on the rise

But some experts say that paying for a home with cash, even if you have it, is a bad idea when mortgage rates are so low. It's possible to earn a higher rate of return with stock investments and easier to get your cash out in an emergency in some cases. Real estate is illiquid, so investors would have to plan to have their cash tied up for the long term.

There's another option, for those who don't want the bricks-and-mortar investment of real estate but still want to diversify. Real estate investment trusts, or REITs, invest in commercial and residential real estate and pay out 90 percent of their income to investors in the form of dividends.

Do you think it's smarter to pay cash or take out a mortgage for a second home or investment property?

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