Home Buying in 27539>Question Details

Jennifer Haga, Both Buyer and Seller in Apex, NC

I am interested in buying an investment property in cash.Is there any reason not to pay cash or place a large?

Asked by Jennifer Haga, Apex, NC Tue Aug 12, 2008

down payment?

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Answers

17
Four and a Half years ago!!!!!!!
2 votes Thank Flag Link Sat Jan 5, 2013
Jennifer,
Most of the answers I read here do not include that dirty four letter word RISK. Me and my wife work day jobs, live well below our means and save up cash to buy houses one at a time. Not borrowing the money provides security and peace of mind. If I don't have a renter in a couple of my houses then it's not the end of the world. When you owe a mortgage it is very stressful when the houses are empty or a renter stops paying and is squatting on the property. Depending on your state it can take months to get them out.
Is it possible to get a mortgage at 4% and make 12% on your money somewhere else? Yes, absolutely. Is there risk involved? Again yes.
I can tell you this Jennifer. A lot of sellers want to close fast and will give you a better price than those borrowing. Get investment properties at a price well below market value. Don't pay full price for anything. Only look at homes built out of brick, block or stone. Makes insurance cheaper almost by half. Check out the best school districts. Those houses always appreciate steadily. The other thing I look at is percent of unemployment. Buy in areas where people have jobs. Don't buy in areas with high unemployment. It takes some work to do all this, but do it anyway. Well worth the time and effort.
Doing this has provided a strong monthly income for us. I am 33 years old and will retire soon because the income from the houses is taking the place of our day jobs. Money coming in every month without getting up every morning to go to a job. That is what we have always wanted. This idea of investing is old fashined but it has worked well for us. Good luck Jennifer.
2 votes Thank Flag Link Tue Apr 26, 2011
I agree. Peace of mind is priceless.
Flag Tue Mar 4, 2014
Congratulations Jennifer! What a great situation! I used to be a corporate financial analyst and I have also prepared taxes for a living. You do not want to sink all your eggs in one basket. you also want to take advantage of the interest expense deduction on your taxes for your rental property. ( I am assuming you are buying to rent...). The interest, property taxes, repairs and depreciation can all be deducted to reduce any income you receive on the property so you do not have to pay taxes on the rental income. Then I would suggest you use some of the cash to invest in a ROTH IRA and make sure you max out your 401K if your company matches. But a good financial advisor can steer you in the right direction when making that decision. Good luck and if you have any other questions, please contact me at lindamorris@ysuhomes.com.
1 vote Thank Flag Link Wed Aug 13, 2008
Keep your cash...Do you sleep better at night with $100,000 in the bank, or would you sleep better owning a $100,000 home? If you plan to flip the home, I would recommend applying the 20% down and keep your cash for necessary repairs that may come up if you do any renovations, especially if you plan on renting the property out...Cash is KING....
1 vote Thank Flag Link Tue Aug 12, 2008
I actually think it serves you well you pay with cash (if by doing this you are not using money you may need 'freed up' in the near future). Then your investment property will not be a hardship to you if you go several months without a tenant occupying the property.
If your goal is to sell later and use the money for college tuition, retirement, etc., you are hoping that the income from the sale property will help with those items, plus hopefully you will be able to receive a rent payment that allows you to get a solid return on your investment. Good luck!
0 votes Thank Flag Link Tue Mar 4, 2014
Pay as little down as you can especially since rates are so low . But... you need to get a good agent to identify properties that have an excellent cap rate and will age well.

http://www.lynngardinerrealestate .com
0 votes Thank Flag Link Tue Feb 26, 2013
I gave you a thumbs up, Ron.
0 votes Thank Flag Link Sat Jan 5, 2013
Hi Jennifer

The advantage to investing your money in real estate is that you can leverage your cash and invest in more than just what cash you have on hand. What I mean is if you have $100,000 you can own three properties worth $100,000 by just putting the required 20% down (although you will probably need to put closer to 30% down on an investment property). You will want to keep some cash on hand for maintenance or repairs if you are flipping.

Tammi Knapp
Residential Real Estate Investment Specialist
0 votes Thank Flag Link Sat Jan 5, 2013
Unlike everyone else whom have commented -LAND IS THE WAY TO GO.Most people can't afford land prices in the cities but rural land outside within 30 minutes of our major universities is a winner.I personally have done this for over 20 years and have always done real well after playing with the land for 5 years .Unlike most realtors ,I can back up my comment with concrete proof and a long long list of satisfied clients.Although things have been sluggish since November 2007 , the future for land is tremendous after 2001 so now is the time.To learn about me and land please visit http://www.learnaboutland.com or http://www.landinvestment.net. .Getting financing is tough but if you have 401ks or IRAS you can roll all or part of them into land .
0 votes Thank Flag Link Sat Feb 6, 2010
When working with investment property there is no short answer because just like every investment whether it is real estate, stocks or anything else it must be evaluated on it's own.
Your plans for the property will determine what kind of a down payment will net you the highest return on your initial investment. Will you rehab and sell, or rent and sell in 2,4,7 years? If you would like to discuss this further contact me at ajb@trianglelendinggroup.com.
0 votes Thank Flag Link Wed Aug 13, 2008
Hi Jennifer,
So much of the answer is based on your situation, I would also reccomend speaking with a financial advisor or at the very least a loan specialist and see what they can offer, it may make more sense to use the cash in another investment while using the rent to pay for your investment property or possibly purchase more than one. If you contact me via my website I will be happy to get answers to any questions you might have. Thanks, Michael
Web Reference: http://www.colvinm.hpw.com
0 votes Thank Flag Link Tue Aug 12, 2008
Hi Jennifer

I agree with the previous answers. You should consult w/ a financial advisor. He/she will be able to let you know if this option is the most suitable for your short/long term goals.
Once you have this information you'll be better positioned to make an offer.
I have one that I could recommend if necessary.

It's great to hear that you've saved enough money to endeavor into this project. Good for you and happy hunting!
Regards,
Lizete
0 votes Thank Flag Link Tue Aug 12, 2008
Jennifer, please consult with a mortgage specialist and a finicial planner before making this decision. There are many factors to consider, and you want to make the right decision. Good Luck.
0 votes Thank Flag Link Tue Aug 12, 2008
The short answer is that there would be few if any reasons why you would want to buy property and pay all cash. If you took the same amount of money and leveraged it you could buy multiple properties instead of just one, or have money available for other investments. (Assuming you've run the numbers and all of the calculations support your goals for return, cash on hand, etc)

To really know the answer Jennifer I'd need to know what your goals are. What are you attempting to accomplish by purchasing property? Are you looking to sell the property in 2 years or 20? Are you intending to rent it? Lease/option? If you clarify the goal it will be easier to provide a meaningful response...
0 votes Thank Flag Link Tue Aug 12, 2008
Usually one would pay cash to have a quick close and reduce or eliminate closing costs. But, you would be wise to seek a financial advisor to provide all the details to better serve your particular situation. If you plan to flip, I would put 20% and keep your cash to do repairs. Again, depends on what your situation is and what you plan to do with the property. Good luck with your decision.
0 votes Thank Flag Link Tue Aug 12, 2008
Jennifer,
There are plusses and minuses to using cash.
You can leverage cash to hold more properties. As a Realtor, that is where I make more money, when you buy more properties.
But this is about YOU! Not ME!

I like cash. Cash IS king.
You can buy great cash flow from an investment property by having little or no debt. Little or no debt is not a bad position, as far as I am concerned.

Both approaches have their supporters and detractors.
You should discuss this topic with a trusted financial advisor who knows your personal circumstances, goals, and risk tolerances.
If you are in a position to make a large downpayment, or cash purpose, I suggest you first connect with a skilled financial planner whom you will pay a flat rate, who is not selling any investment vehicles, and form an overall long-term wealth management plan.
See how real estate investment fits into that plan.

Good Luck!
Web Reference: http://MikeJaquish.com
0 votes Thank Flag Link Tue Aug 12, 2008
Based on your short/long term goals. I recommend confer with real estate CPA or financial planner who can review your entire business plan. You might be able to take extra cash apply towards other investments, than placing all your money in one location.
http://www.lynn911.com http://www.homes-for-sale-dallas.com
Web Reference: http://www.lynn911.com
0 votes Thank Flag Link Tue Aug 12, 2008
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