Cash Offer or Financing when starting out with BRRRR?

[Mike Amann]

I've been going back and forth on it if makes sense to get started with BRRRR investing with an all cash offer or to leverage financing. I am diversifying out of my company stock and will have $200K to invest within the next 1-3 months. The way I look at is I can purchase 1 unit all cash or put down 20-25% on 4-5 units with the cash I will have ready.

Is there one strategy better than the other? Look forward to your input! 

[Greg Kasmer]

@ Mike - Somewhat depends on the market and the homes you are targeting, but to keep things simple let's assume your "All In" costs (purchase and renovation) for a house is $100k. In that case, I would actually get two properties using all cash and then refinance after you complete the renovation and have a tenant in 6-9 months.  Typically what I find it that you can get a slightly better deal (i.e. lower purchase price) with all cash. The other benefit is that if you buy with leverage on the purchase you wind up paying loan fees, costs, twice - once on the purchase and then again on the refinance. So, if you buy for cash up front and then get long-term financing afterwards (6-9 months) I think that will be best approach from a cost standpoint. The downside is that if you find other opportunities while you're rehabbing the two homes, you'll be unable to buy the deal. However, in that scenario, you might want to consider private money or hard money. Good Luck!