Real Estate Investment question

[Tim Marion]

Hi,

In the last year here in AZ my in-laws have bought 3 SFR for cash. They are retired and do not have any expenses other than health insurance, food, fuel, etc... They are in the hunt for another property. Question, would it be better to buy one home for cash or finance and buy multiple?

Thanks!
Tim

[J Scott]

Originally posted by Ed Barker:

Originally posted by Originally posted by Tim Marion:

Thank you for responses. To buy and hold for rental income. They were told by a real estate agent that they would only be able to secure financing after having rental income for 2 years. Is that true?

No, it's not true, and just illustrates why I despise 90% of real estate agents. Most of them are as worthless as tits on a chicken, but boy do they know how to talk out of their arse! Will said it best. Having a license really doesn't mean much, except that the person passed a test that you'd have to be a moron to flunk.

Just to add a little more information...

It probably IS true that they wouldn't qualify for conventional financing, as it sounds like they are retired and probably don't have much income. Conventional lenders generally don't care what your net worth is if you don't have income, so the cash sitting in the bank isn't going to help their loan approval.

Now, that said, there are other types of loans besides conventional. Many small and commercial banks lend their own money and make their own underwriting rules. These are called portfolio loans, and many portfolio lenders will provide financing without significant income, if the borrowers can show decent cash reserves, have good cash flow from the properties and/or can use other real estate to collateralize the loan.

As for whether it's better to leverage or pay cash, everyone has their opinion, but other people's opinions shouldn't matter. They need to determine their goals and investing horizon and make their own decision. I'm a fan of leverage, but I would never say that not using leverage is wrong for someone else.