I recently came into $2M dollars through a business win. Being an entreprenur my credit score is bad, nothing

Asked by Jamie, Newport Beach, CA Mon Aug 25, 2008

major just missed and neglected credit card bills and utilities when things were tight. I'm 30, single and I'm wondering, does it make sense to purchase (in Laguna) in cash or take a mortgage. I'm considering a number of $1M-900K fixers. Why pay interest on it if I have the cash?

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21
Jeremy Lehman, Agent, Garden Grove, CA
Tue Aug 26, 2008
First and foremost, get your debts in order and consult with a financial advisor. You also might want to consider putting some of that money back into your business. Second, with interest rates still low historically, it is a good idea to shop for the right loan for you. Buying a home all cash is great for some people, but it doesn't have many tax benefits, and you can probably get more interest on your investments than the current mtg rates are charging you. Rich people get richer by leveraging their assets, and reinvesting the money. At this point in your life, if you make the right decisions and investments over the next 5-10 years, you could probably retire and live off of the interest of your money. Good luck.
Web Reference:  http://www.LehmanHomes.net
2 votes
Bob Phillips, Agent, Rancho Santa Margarita, CA
Tue Jun 2, 2009
Jamie, Mr. Blue's suggestion might work for him - though I seriously doubt it. He seems to be clueless about what's been happening for the last few months in Southern California.

This article could easily apply to Laguna Beach:

http://www.latimes.com/classified/realestate/news/la-fi-cove…

The truth is, there are some fabulous opportunities out there - right now. There is NO compelling reason to wait even ONE month, let alone 12. Your cash will be king in these higher price ranges - make the best of it - NOW.

I have over 32 year's experience in South Orange County - through good times, and bad - many times. I would be honored to be your Realtor of choice, in your search. Good luck to you!
0 votes
Mr. Blue, Home Buyer, Laguna Beach, CA
Mon Jun 1, 2009
Jamie, get the financial advisor. Only a fool would buy in Laguna or Newport right now. Prices in April were down in Laguna a whopping 31%. Many homes for sale is Laguna are foreclosures and this drives values down. Wait 12 months then buy lower.
0 votes
Harrison K.…, Agent, Irvine, CA
Thu Nov 6, 2008
Jamie ... I agree with Caroline that you should consult with and hire a financial advisor. Your hiring of a Realtor agent would be secondary to that step. If you are advised carefully and then want to proceed with finding and purchasing of a home or real estate, that's great. Real estate should be a big part of your investments, but not all. We have relationships with some good financial advisors. If you want a reference, please let me know. Thanks.

Harrison K. Long
Realtor and broker
Explore Group Properties, Coldwell Banker Previews http://www.BuyersExploreHomes.com (the best search web site)
949-854-7747
hklong@cox.net
0 votes
Caroline York, Agent, St Petersburg, FL
Thu Nov 6, 2008
You need a financial advisor not a realtor or mortgage broker. Please. Be wise at this time and speak to someone who can protect your interests for the long term. Sometimes it is the tax deductions that will make your money grow so there are actually some "good debts" out there. The best thing to do is interview at least three financial advisors. You may have to pay the one you choose a fee but it may be far less than what you will lose without the proper advice. The last people you should be asking are the people who are going to benefit from your investments. Now, go find an advisor - then find a realtor and a mortgage broker... Congratulations and good luck!!
0 votes
Harrison K.…, Agent, Irvine, CA
Thu Nov 6, 2008
Jamie ... If you are interested to find and buy a home to live in... you should move forward... in any market ... and be willing to buy and live in the home for 3 to five years ... find the home you like, check out the comps, hire a quality Realtor agent, someone who will represent your interest moving forward ... and then offer and buy the home at the best price in the shortest possible time.

If you want fine representation and are interested in discussing this and the process of buying a home, please call or contact me. Thanks.

Harrison K. Long
Realtor and broker
Explore Group Properties, Coldwell Banker Previews http://www.BuyersExploreHomes.com (the best search web site)
949-854-7747
0 votes
Bill Eckler, Agent, Venice, FL
Wed Oct 8, 2008
Jamie,

The experts are saying to hold as much cash as you can......On the other hand there are opportunities to be had in the buying market now.

We suggest using as much of the banks money as you can and look for the perfect deal now.
0 votes
Sandra Carli…, Agent, Newport Beach, CA
Wed Oct 8, 2008
This is a question for your CPA after you have looked at several options with your lender, not a Realtor. You should also consider talking to a financial planner (to keep your 2 mil working to your best advantage in the long term...) which your CPA or lender can refer you to.

My favorite lender to Nate Lindsey and he has several financial planners he works with for his high end clients. He can be reached at (714) 394-0506. Nate also trains CPA's, he will point you in the right direction. Just tell him Sandra referred him to you.
Web Reference:  http://www.OCBeachBlog.com
0 votes
Jonathan Tay…, , Orange County, CA
Thu Sep 18, 2008
Why pay interest on it if you have the cash? Becaus you write it off your taxes. It's called the homeowners mortage deduction and is the #1 writeoff for homeowners in the nation. Do you want to pay less taxes? Most people answer that yes the ones that don't are welcome to pay as much as they want.
I neve recommend buying a place cash as the cash on cash return is lousey. Why not leverage 6milion dollrs worth of real estate with your 2Million?
Here is a great Laguna property and the link below that will take you to all the listings in the MLS

http://www.homebuyershope.com/Taylor_Properties_listings/C9E…

http://www.homebuyershope.com/custom1.shtml
0 votes
Rita Moriarty, , Ladera Ranch, CA
Thu Sep 18, 2008
Jamie,

Real estate investors usually prefer interest only loans because of the lower payments which increase their monthly cash flow. I am not recommending interest only to you, but wanted to point out the investment strategies used by investors: getting into real estate with as little down as possible.

Diversify your investments. I wouldn't recommend putting half of your $2M into one property. You definitely need a good financial planner, a good accountant and a good real estate professional. A financial planner will help you decide how to diversify and invest. You will need to work out a monthly budget so you can plan for your future.

Buying a fixer is a good idea if you do your homework and utilize the free services of a qualified real estate broker/agent. The seller pays the commission to the listing and buying agents so take advantage of it.

I would be happy to help you find qualified professionals. Check out this page for Laguna listings:
http://www.californialandandproperty.com/content/searchresul…

Visit my site to calculate mortgage payments (mortgage center button), search for property and real the latest real estate news.

Good Luck!

Rita Moriarty
Realtor/Broker Associate
Realty Benefit
0 votes
Jonathan Tay…, , Orange County, CA
Thu Sep 11, 2008
Jaime the interest is a write off it's called homeowners mortgage deduction. If you purchase by cash you have zero leverage and the 2M could buy you 5m in Real estate. The cash on cash return os not good.
Search all Laguna homes below

http://www.homebuyershope.com/custom1.shtml
0 votes
Dave Muti, , 07054
Wed Aug 27, 2008
My advice would first concentrate on seeing what credit issues you really have and the severity of them. Assuming they are not insurmountable I would then focus on eliminating any consumer debts you have. This in and of itself will also help improve your credit scores.

Regarding a million dollar house; not sure if that is a good move for you whether you pay cash or get a big mortgage. The root of the question is really why do you want to buy this house coupled with what do you do for a living and what your income is? These questions factored against your short term cash flow goals while being mindful of your long term retirement plans are all necessary issues to explore before you buy any house. Then of course is the fact that if you paid cash that money would have a zero rate of return for you so you might do better by having a mortgage which would give you a deductable expense while preserving more of your assets to grow and compound for your retirement goals.

I would seek out a qualified mortgage planner to address these issues and this person would also work in tandem with a CPA and financial planner to ensure all goals are met while gaining the most tax efficiency. Hopefully this helps? If you have any further questions or need any clarification please let me know.
Rgds,
Dave
0 votes
Tim C. Lorenz, Agent, Mission Viejo, CA
Wed Aug 27, 2008
Jamie it makes sence to own and not have a mortgage. But there may be some loss mitigation strageties that you may take to make sure that in business if you have someone sue you you could lose the home. So there are reasons and strageties that I could help you with. Call me or e-mail me Tim@markandtim.com
Web Reference:  http://www.markandtim.com
0 votes
Ellen Boswor…, Agent, Laguna Beach, CA
Tue Aug 26, 2008
Jamie,
I would suggest that you consider speaking with my mortgage broker who has been in the business for years. She is easy to talk to, very knowledgeable and can work with you to improve your credit if you are interested in a loan. There are tax benefits to taking out a home mortgage.
On the fun side, there are great deals in Laguna Beach right now, and plenty of homes in the price range you mentioned. Home prices have definitely come down in Laguna and there is a lot on the market to choose from. I go out every Wednesday morning and see all the homes that are new on the market and there are great beach houses for you to choose from. Best wishes and please contact me if I can share my mortgage broker's number or introduce you to the many unique neighborhoods and price ranges of Laguna Beach. If you have seen a home on the market that you have questions about, I have probably seen it and can share what I know.
Ellen
0 votes
Alma Kee, Agent, Tampa, FL
Tue Aug 26, 2008
Pay all cash but then get a small mortgage because the lender will then keep track to make sure property taxes and insurance are current.
0 votes
Thom Colby, Agent, Irvine, CA
Tue Aug 26, 2008
I agree with the prior answers but want to repeat what Dave and others have said. Since you have this significant windfall, you should pay off / bring current debt. Also, meet with your Financial Planner and discuss what's best for your individual situation. I've had clients who can pay "all cash" any day of the week, but have been advised to take a mortgage when they purchase by their FP. If you have blemishes on your credit, that can be easily corrected with a great Credit Repair / Credit Management company. Here is one to consider that is very reputable: Manny @ EZ CHOICE FINANCIAL – 562 / 598-5277 see the link below .
You are looking to purchase at a great time and truly anyone can get a mortgage with a significant downpayment. Depending upon how serious your credit issues are, you may have to put down as much as 60 - 70% to get that loan at a high interest rate. Best of luck!

Cheers to you,

Thom Colby
Realtor, Southern California & Houston, TX
2008 Chair, Pacific West AOR MLS Committe
2008 Member SoCal MLS Board of Directors
2008 Member SoCal MLS Steering Committee
2009 Member-elect, Pacific West AOR Board of Directors
2009 Member-elect SoCal MLS Board of Directors
Member, CARETS Rules and Compliance Committee
0 votes
Debt Free Da…, , 85260
Mon Aug 25, 2008
Get the collections paid off and your credit in shape. It shouldn't take to long to do that. You may want to look at a debt settlement program to do this for you.
0 votes
Charlie Ramos, , Tulare, CA
Mon Aug 25, 2008
I like some of the answers you have received, but I need to add another. You should be thinking about leverage. How are you going to make your money work for you. With that type of winfally, why would you put all of your money in real estate. THINK! Diversify. Put some of your money in real estate and some into something that will earn greater returns than the appreciation rate. Your advice should be coming from three sources: A good cpa, a great real estate broker, and an outstanding financial planner.

Want to buy a home in Laguna? I'll drive there to meet you!
Web Reference:  http://www.charlieramos.com
0 votes
Linsey Plane…, Agent, Rancho Santa Margarita, CA
Mon Aug 25, 2008
There are some benefits to securing a loan. If you are fixing a property, are you planning a long term hold or do you want to sell it right away? A loan may have some tax benefits in that the interest is tax deductible but the bigger issue may be the ability to leverage yourself and not tie up all your funds in one project. You may have some bumps in the road with securing the loan but if you have cash reserves, that will likely help to handle some of those issues with the lenders.

Talk to a great lender and a very well qualified CPA. Don't hesitate to let me know if I can help you. Best of luck and congrats on the 'big business win'.
0 votes
Cynthia Flem…, Agent, Laguna Niguel, CA
Mon Aug 25, 2008
If you're credit is not good, you will find it difficult to obtain financing right now. Do you have an idea of what your score is? If it's not too bad, you may be able to find financing, but you may be required to pay a higher interest rate. Cash is an option - sellers, especially banks with REO properties, vacant lots, like to see all cash deals and the benefit is that you can close quickly. However, it is important to understand any tax liability you may have. I suggest you speak with an accountant or your tax advisor. If you need help finding any deals in Laguna, let me know. I live and work in Laguna Beach and would be happy to help you out. Cynthia
0 votes
Rita Tayenaka, Agent, Mission Viejo, CA
Mon Aug 25, 2008
You should talk to your CPA to see all the tax consequences and benefits of a mortgage. You can make a proper decison then. Most likely a loan would be in your best interest so you have some write-offs come tax time.
0 votes
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