Am I a Cash Buyer? Help Understanding a Few Things.

Am I a Cash Buyer? Help Understanding a Few Things.

Investor · Atlanta, GA · Member since 2020 · 2 posts · 0 votes

Hey all, first post here.

I'm going to be getting involved in Real Estate and I'm trying to form a strategy. I've been researching wholesaling, flipping, as well as single/multi family buy and hold investing. I've read a handful of books on each topic, as well as almost all the ones commonly recommended on these forums.

I've decided to take the approach of buying, rehabbing, and renting for a few years before selling and using a 1031 exchange to defer taxes on the profits. I run my own business and have a fair amount of cash that I want to put to work over the next 3-5 years. So here are my questions:

1. Can I purchase a property with cash by getting a loan from the bank first?

2. Can I purchase a property with cash and then get a loan for the home equity at a later date?

3. Is there a limit to this? Can I buy 50 properties in cash and then get a loan for the equity?

4. In my research on wholesaling I quickly learned that it is a very competitive field. This is where the term "cash buyer" kept coming up and I realized that might be more of my thing. Can you typically get properties at a significant discount to the market when buying from a wholesaler, or are you paying close to listing price?

My concern with buying properties with cash is that it limits my purchasing power when compared to a typically 20% down mortgage.

I'm still in the early stages and trying to get clarity on a few things. Thanks for the help!

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Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
6y

I wouldnt buy , rehab , rent for a while and then sell . A friend who flips houses if he finds a deal but is busy on other projects , he will fix the house good enough to rent , rent it for a year sometimes 2 , THEN when he is ready he will come in and rehab the house . This way he has covered his carrying costs and then some . And he is selling a freshly rehabbed house . 

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  • Investor/Accountant/Builder · Meno, OK · Member since 2014 · 1k+ posts · 918 votes
    6y
    1. not likely 2. yes 3. sure, a blanket commercial loan 4. I never have bought from a wholesaler. if you have to get a loan to purchase then you are not a cash buyer A cash buyer has: Cash in the bank or A line of credit with available funds to purchase as cash or you own the bank
  • Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    6y

    I wouldnt buy , rehab , rent for a while and then sell . A friend who flips houses if he finds a deal but is busy on other projects , he will fix the house good enough to rent , rent it for a year sometimes 2 , THEN when he is ready he will come in and rehab the house . This way he has covered his carrying costs and then some . And he is selling a freshly rehabbed house . 

  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    6y

    @Matt Gaedke, Good suggestion by @Matthew Paul.  Everyone talks about the Brrr method because it lets you improve and then pull cash out with a refi while renting.  That's a good strategy.  But if your main idea is to simply roll one sale over after another, then buying renting and then rehabbing and selling will probably be more cost effective.  Both good models.  the lynchpin to each is that when you sell you'll be able to do a 1031 and keep the deferred tax working for you indefinitely.

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  • Investor · Atlanta, GA · Member since 2020 · 2 posts · 0 votes
    6y

    Thanks for the feedback! It does seem to make more sense to get the property into a rentable condition and then do the big rehab prior to selling. Great info!

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