Buy Cash then release equity?

Question

Hi everyone,

Been lurking here for a while - but time to get some of the forums advice!

Context: We're from the UK and all previous investing has been done in that market. We're about to get into the US market and potentially buying a single family or duplex in Austin. We've not been in the US for a very long time but my credit is good and I'm able to get a mortgage without any issues.

Question: We are lucky enough to have cash to buy the property outright. My question is, should I mortgage the purchase in order to set it up for a Buy and hold with debt paydown etc - or should I buy cash to minimize costs while the rehab takes place, get tenants in, then get an equity release loan on that property in order to move on to the next investment and have the property then set up in the same way as if I had initially got

The property is around the 200k mark. I'm in the Bay Area so this is an out of state investment and I'm considering using a turnkey service -  I would really appreciate any input from you all.

Thanks in advance,

Jeff Wallenius · Answer

@Dan Clarkson how about purchasing cash, paying for the rehab and then refinancing to cash out a majority of your cash? This is the BRRRR method and you can set it up with a couple of turnkey providers. A great way to maximize your available capital while participating in the equity up front. Happy to provide more details via PM.

Arlen Chou · Answer

@Dan Clarkson I don't mean to be jumping topics on you, but have you studied the property and income tax implications of buying in Texas and living in CA?  If you have not, I suggest you really look at this piece before you pull the trigger.

Brian Garrett · Answer

I'm trying to decide the same thing. I'm fortunate enough to have saved up a decent amount of cash for my REI aspirations as well but I'm not sure if I should pay cash for a property and the rehab to cut back my initial costs and then cash out refinance to pull my money back out after or just try and mortgage it out from the beginning and create positive cash flow. I don't know what's best.

Brent Coombs · Answer

@Dan Clarkson, how far along are you with finding a local (to your anticipated investment/s) team of Contractor/s, Property Manager, and "deal-finder/s"? I recommend: get those trusted relationships happening FIRST, before putting in any out-of-State Offers!

Nice to have many finance options, but, your question didn't address your REAL issue. All the best.

Aaron Cullen · Answer

@Dan Clarkson I'm not too familiar with an equity release loan, just googled it and it says you need to typically be 55 or older to get one. I would agree with @Jeff Wallenius and suggest the BRRRR method. I've implemented it on several of my properties and I have a few more in the works. It's a great method that works well when used correctly.

Buy Cash then release equity?

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