BRRRR Method with 100% cash vs financing

[Eric McCarty]

Hey All

I've been doing a lot of research on different investment methods and have mainly been focused on the BRRRR strat. Reading David Green's book, he stresses in the beginning to use cash to fund both the purchase and the rehab. I'm struggling to figure out what the differences are between using all cash, or financing. From what I've read, once you close on a house the seasoning period is usually 4-12 months before you can cash out refinance and it appears that this seasoning period occurs no matter how you've purchased the property; so either way, your cash is tied up for that period. What am I missing? I do understand the hidden costs of not having to deal with the bank, closing faster and cash is more applying to buyers, is that all? Thanks everyone!

[Michael Doherty]

@Eric McCarty I don't know if I necessary agree with that statement 'funding the entire deal with cash'. There are a lot of investors, myself included that never would have gotten started if we didn't use debt to fund deals. Debt/leverage used in a responsible and prudent way, is one of the most powerful tools to growing your business. 

The Dave Ramsey school of thought would tell you not to take on any debt. However, some of the most successful people in real estate and other fields started off with debt and using other peoples money. Should you leverage yourself 100%... NO. But if you are short on cash and try to keep saving to fund a deal 100% cash, you may never get started. 

Think about it like this: If I gave you a 100k loan at 5% to fund your deal and you knew you were going to make 10% on the backend would you do it? You essentially just make 5% net profit without touching your own bank account. Even if I had the funds to purchase and rehab 100% cash, I still wouldn't. You pigeonhole yourself to that one deal. What if during the middle of that deal, you get presented a different deal with fantastic numbers. All your capital would be tied up and you would have to pass.