Pay Cash or Finance?

[Eddie Lawal]

Hello Fellow BPs...I need your advice!

I am looking to buy 2 condos in a "not so good" area mainly for cash flow. Rents are $1000/month. Condos cost 63K and 57K respectively. HOA + taxes is $364/month each and both are currently rented. I can afford to pay cash for both but was wondering if this is a good idea as compared to financing from a lender. Your inputs are much appreciated!

[Justin Fox]

Financed, you're looking at 1,228.00 in Principal, Interest, HOA and Taxes each month. $772 isn't much to cover repairs, capex, vacancy and insurance (if dwelling/liability isn't covered in HOA). You're going to want to at least save 100/mo for repairs for both (1% of purchase). So now you're down to $672.

I think you'll be better off forking over ~35,000 for ~500/month (net) versus ~130,000 for ~1,000/month (net).

I would only pay cash for something if it was an off market deal that wasn't able to be financed but knew I could make money (at least get my cash back) on the cash-out after repair and make CF each month.

I agree with @Vang Cha, you're in a position to put that 120,000+ into something much larger scale with more income, better value, management and you don't have to deal will HOA's creeping in on your bottom line.

Good luck!