Buying with Cash vs Loan

[Stephanie Szeto]

Hi there - I'm Stephanie, a relatively new BP member! After doing a lot of research, I'm at the point where I'm looking to start buying my first property. As I've started to think about how to finance this property, I'm debating whether it makes sense to buy in cash if I have the means to, or still get a loan to acquire the property if the eventual plan's to refinance most of the money out later anyway. (My current plan is to follow the BRRRR method and buy and hold for the long-term.)

With regards to cash, seems like advantages include: 1) making the acquisition potentially easier / more straightforward since I don't have to deal with financing, 2) lowering the cost of potential over-runs with rehabbing since I won't have to pay the additional loan interest in the meantime, but disadvantages include: 1) tax implications of drawing out more of my own money and needing to pay more capital gains on the stock I'd have to sell. 

With regards to getting financing, seems like it's generally flipped - advantages include: 1) using less of my own money upfront and being able to take advantage of more leverage, but disadvantages include: 1) making property acquisition more complicated + expensive upfront, 2) risking needing to pay more in interest if rehab ends up dragging out for longer than expected. 

Thoughts on going with either direction? Am I thinking of this the right way?