Buy duplex with cash, get mortgage after?

Question

I'm a new investor. I recently sold a business and have enough cash that I can buy (and repair) a property without financing. I like the advantage of making a cash offer, plus being able to fixes without following bank rules. I also like leverage and low interest rates.

So I want to buy a 2 unit rental property with cash, then take out a mortgage. Is this a reasonable strategy? What sort of rate should I expect? As a result of the sale of my company, I have gone from low six figure W-2 income to mid-six figure investment income. Will this affect my mortgage application?

John West · Answer

I did exactly this @David J. I bought a property all cash for $50k at auction. Within 2 months I had taken a mortgage out on the property (cashed out) for $60k. The key is finding the right bank.

Most banks will only want to give you a mortgage of 80% of purchased price. They will claim that there is a 1 or 2 year seasoning period you have to wait for before getting more out. Thanks to BP I found out that not all banks go by this. Call all your local banks. It took me 7 or 8 calls before I found a good one. What you're looking for is a "portfolio" lender. Portfolio lenders keep all of their loans in house and don't sell them off to major institutions, therefore don't have to follow all of their rules.

Small banks/credit unions with 3 - 10 branches are your best bet.

I'm certainly no expert, but if I can help in any way feel free to private message me.

Scott Weaner · Answer

Another option would be to get a HELOC on the property. Then you will have the cash available but will only pay interest on what you use, when you use it. I am currently in the process of doing that with the property that I bought cash.

Harjeet Bhatti · Answer

@David J. You can  cash out any time when you spend cash in purchase of property.  You should be currently employed in same line of work when you are ready to refinance.

Brian Garrett · Answer

This is very common and what you often see referred to as the BRRRR strategy here on BP.

John Thedford · Answer

CASH offers are usually considered over financed offers because sometimes financing falls through and/or it takes too long.

MJ Meneley · Answer

David, what is the advantage of buying with cash and then taking out a mortgage? Why wouldn't you just buy the house with the mortgage? I'm missing something...(and very new to all of this)...thanks!

Buy duplex with cash, get mortgage after?

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