I am a mortgage professional and admittedly have a financial incentive to recommend that you take out a new loan. However, from a professional standpoint I also believe it is the wisest thing to do assuming that YOU, first and foremost, UNDERSTAND WHY. I would encourage you to read rule #21 from Ric Edelman’s book, “The New Rules of Money”. If you do not have access to this book then email me and I will email you a copy of this chapter form the book. I think he does the best job of explaining the case for taking a mortgage.

Good luck!

I am a cash buyer as well. I have spoken to many financial experts regarding paying cash or financing with a large down payment. The best advice I received came from a long time friend who works for Smith Barney as an investment advisor, he said if it has always been my goal to own a home with no mortgage then do it. The second best advice I received was from a tax accountant; she said the interest on a mortgage (including fees to the lender) will probably be more than the tax deduction.

Sadly, I found the people who recommended financing part of the purchase had an interest in advising me where to put the rest of the money. For example, an investment advisor looking for a sale or a Realtor with another property to sell me. Only my good friend, the Smith Barney advisor, actually asked me what my mortgage and investment goals were. Everyone else saw me as a target to sell.

If using cash I think you should definitely talk to a financial planner and strategize! There are pros and cons...opportunity to act quickly can be an opportunity to get great deals in this market which means you could build equity faster and build your portfolio and bank account buying and selling. Some I know buy low and sell a little higher for gain, then do it all again over and over until they are debt free entirely and able to live life like no one else. The motto of live life now like noone else (eating rice and beans and handling money wisely, no charging, no overspending on credit) so they can live life later like noone else (with debt free living with a lot of cash from frugal living). You can feel good about having an investment that's paid off (as long as you don't overpay for it)- this market is tricky; don't get too anxious..do your homework and make sure you buy something for less than what it is valued at- a good agent can find this type of properties for you.

On the other hand there may be a reason for you to use the Tax deduction for investments done via mortgage. Typically a mortgage eats up a lot of extra hard earned money and is used mostly by those who don't have the capital. Being in debt isn't at the top of anyone's list. Looking at the amount of interest you will pay over the life of the loan may steer you away from a mortgage if you have the cash.

Need help finding that property here? Let me know. My web site is referenced below. email me at jlizotte@prunw.com

All offers that are not on a sales contract are Cash. Being a buyer with the $$ from a loan is no difference than being the buyer with cash as to the seller it is all Cash at closing.

Having said that you represent a stronger prospect and I would Imagine will get additional considerations as a result in the $2 to $5 K Range. It sounds like you have accumulated some great equity to invest. Look first at what your needs are. I would get a home that you are comfortable with.

Paying Cash has its advantages but you will have no tax deductions as a result and you should consider leveraging that money. There has never been a better market in recent years to invest in Real estate. I would strongly consider putting about 25-30% of your cash down on a home and retaining the balance for buying foreclosures or short sales. There are some great buys and we have clients with money making money and lots of it. I would invest in 2-3 other properties with the same cash.

Portland for instance is expected to go up 30% over 5 years. If you buy one home you will generate about $100K appreciation. If you use that same money to but 3 or 4 homes your return starts to look like $300-$400K over the same period. There are other benefits to buying investment property as well.

Your in a great position Peyton. I would make the most of it.

Always glad to help and we have some investment level deals right now to discuss.

Regards and good luck;

Dirk T Knudsen
ReMax Metro
President
ReMax Hall of Fame and #1 ReMax Team in Oregon
503-799-8383

Hi Peyton,

I just returned from Japan...beautiful country and I can not wait to return. I even experienced a 7.4 earthquake, Kiyoto, Shinjuku, Shio Dome, the wordly famous fish market, Hakone (absolutely lovely!), awesome sushi, bullet train, and very generous and helpful people. If anyone reading wants to experience a lovely culture and clean, efficient society...visit Japan...we could learn alot from them.

On to real estate: You may visit:
http://www.HouseNow.com

to search all properties that are for sale in the Portland metro area. Our website is served by 3 multiple listing services that pretty much blanket Oregon. Our site is user friendly and intuitive.

Regarding your questions, the only risk of loss you may experience (CON) is the opportunity cost of a greater return on your money in another investment that would otherwise grant you greater return than what your choice on real estate may provide. Consider appreciation to either be stagnant or in reverse right now...in general. You may also consider finding that neighborhood where values are continuing to increase and attempt to ascertain if that area will reward at a greater rate than another investment, and moreso not fall victim to the market in general that is in reverse potentially.

The PRO of paying cash is the lack of debt service and pay off with consequently saved mortgage interest.

As for a cut in price, try offering 85-90% of asking price. Maybe look at what the property is truly worth (comparable SOLD properties) and offer within 90% of that, assuming the seller's may negotiate downward from present asking price. On a price of $300,000, an 85% reduction for a cash offer would be $255,000 and remember to include a very short closing of 2 weeks. There is no equation to this, it's more about seller motivation and the ability of your broker to negotiate.

Regards,

Chris Courtney http://www.HouseNow.com
State Certified Residential Appraiser - 15 years
(541) 284-2511 office
(541) 912-1405 cell http://www.HouseNow.com
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Peyton,

If the interest rates are low enough financial advisors will recommend using the banks money and borrowing. This frees up your cash to take advantage of other opportunities that may present themselves.

Experienced investors will tell you that "cash in hand" is essential for taking advantage of opportunities. With the cash in your account, you can always pay off the note if you elect to do so,