Whats is everyone's opinion on paying 100% cash for properties

Buying & Selling Real Estate
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Whats is everyone's opinion on paying 100% cash for properties

Kishun Barker
Houston, TX · Member since 2020 · 8 posts · 43 votes

I am interested in buying deplexs in cleveland with 100% cash and was just wondering what tips or advice other investors can point out to me

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Charles Carillo
Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes
5y

@Kishun Barker

It is a great, low risk strategy. You can always refinance in the future....possibly into portfolio loans with several duplexes at better rates and terms.

On another note, it is great to hear people paying all cash on BP for properties...usually people are posting about buying property with no money which is a recipe for disaster.

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  • Mark H. Porter
    Investor · SC NC, VA · Member since 2020 · 1k+ posts · 756 votes
    5y

    We may have all different opinions, but why do that when you can borrow at less than 4% and make 8-12-% on that money?

    33Reply
  • JD MartinBusiness Member
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    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    5y

    That's how I started, but eventually it becomes difficult/impossible to scale in any reasonable time frame without leverage. And money is ridiculously cheap right now. 

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    26Reply
  • Charles Carillo
    Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes
    5y

    @Kishun Barker

    It is a great, low risk strategy. You can always refinance in the future....possibly into portfolio loans with several duplexes at better rates and terms.

    On another note, it is great to hear people paying all cash on BP for properties...usually people are posting about buying property with no money which is a recipe for disaster.

    37Reply
  • Kishun Barker
    OP
    Houston, TX · Member since 2020 · 8 posts · 43 votes
    5y

    @Mark H. Porter why knowingly take on debt when i can accomplished the same Financial freedom without every having to beg for loan and can bypass all the stress that comes with having a mortgage

    18Reply
  • Mark H. Porter
    Investor · SC NC, VA · Member since 2020 · 1k+ posts · 756 votes
    5y

    Because you have 4-5x the buying power and can diversify far better.  That $200,000 you may have for a duplex (its a guess) will allow you to buy 4 or 5 of them and maybe in different neighborhoods or cities.  Please do a simple google search asking "should I finance or pay cash for a rental property" and you'll see some very powerful analysis arguing for both sides.

    30Reply
  • Andrew Weiner
    Property Manager · Cleveland, OH · Member since 2020 · 268 posts · 315 votes
    5y

    You can buy several properties and refi in a non recourse commercial loan so that you can continue to scale.  If you just want to get better returns than the bank then buy and hold with cash and get your returns with very little risk to your principal.  You do need to also keep some reserves or a line of credit so that you can cover any larger repairs that come up.  

    On the other hand your COC return should be better when you use low interest financing and if you have more properties then you have better diversification. Unless you have unlimited funds you will be more limited in your growth, if that is your goal.

    9Reply
  • Kris L.
    San Antonio, TX · Member since 2019 · 930 posts · 836 votes
    5y

    @Kishun Barker

    It’s great and I would love to be able to do more of it. The trick though is to refi them out after 6 months so you can buy another investment.

    7Reply
  • Matthew M.
    Los Angeles, CA · Member since 2018 · 86 posts · 86 votes
    5y

    @Kishun Barker With cash offers you can access deals with less competition so it makes sense as an off market strategy, buying from wholesalers or distressed sellers who value quickness and surety of close for instance. If you are buying on market deals it doesn’t really add much to the offer so if your goal is to leverage you should just use a purchase mortgage in that case.

    4Reply
  • Brittany Woosley
    Real Estate Agent · Cleveland, OH · Member since 2020 · 20 posts · 27 votes
    5y

    @Kishun Barker cash is king and could definitely help get you a better deal on the duplex. Is there room for improvement on the property? If you buy at the right price you could have a solid BRRR opportunity on your hands which would allow you to scale your portfolio more quickly. If I had the cash, that's what I would do.

    10Reply
  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    5y

    Cash can make your offer more competitive, quick closing and such.  There is something to be said for liquidity. Cash in houses isn't easily deployed to other opportunities. Money is cheap now too.

    5Reply
  • Bill P.
    Investor | Syndicator | Instructor · Cincinnati, OH · Member since 2008 · 435 posts · 198 votes
    5y

    @Kishun Barker there can be an advantage of buying all cash from the seller's viewpoint but quickly refinance to give you some leverage for your ROI. Having cash to buy is great optics.

    4Reply
  • Bob Galivan
    Real Estate Broker · Cleveland, OH · Member since 2019 · 33 posts · 55 votes
    5y

    Hi, Kishun. Welcome to the forum. As you see from the responses below, there are differing opinions as to whether or not to use cash for your purchase. My thoughts are as follows:

    • First: A "Duplex" in Cleveland refers to a property where each side of the duplex can be sold as a single family home. What most people think of as a duplex here is called a two-family, which has two living units that would be sold as a single property or rented as two units.
    • In most cases, traditional lenders will not lend below $50,000.00. Given the broad range of pricing in the Cleveland market, that's a consideration. At $50k and up, its usually 25% - 30% down. The income of the property can apply to the income requirement for the loan (depending on the lender). If you purchase a fixer-upper cash, once there is a tenant in place, you can refinance and pull cash out - use leverage to get most of your cash back.
    • There are multi-family properties in this market that can be had for very little money, but need substantial repair. Right now, there are 191 multi-family properties (two-, three-, and four-family) available in the City of Cleveland and East Cleveland priced from $13,500 to $549,000 with a median price of $79,900 - that means that close to 100 multi-family properties in that market can be had for under $80k
    • In the past 90 days, 265 mult-family properties sold from $7,000 up to $395,000, with half selling below $85k. So it's a healthy market.
    • One thing you need to watch out for are municipalities like Shaker Heights that require Point of Sale (PoS) inspections.I am not 100% sure, but I think that mosts of the municipalities require that the seller obtain the inspection and provide it to the buyer BEFORE going to contract on the home. It is (unfortunately) common to see the seller require that the buyer obtain the PoS, or that a buyer goes to contract before the PoS is issues. The problem is that if the seller does not fix the issues noted in the PoS, they become the buyer's responsibility. On top of that, many municipalities require that the buyer willing to assume the PoS violations put money in escrow equal to the amount the city thinks it will cost to repair the problems. Shaker Heights requires 150%. If Cleveland Heights decides that the repairs will cost $8,000 to fix, you have to put that money up at closing and leave it there until you fix the issues and pass inspection. It can double the cost of repairs. Cleveland does not have a PoS requirement, so most of my focus in that city. East Cleveland has a PoS Requirement but doesn't require escrow. There have been some lawsuits where courts have found that PoS inspectons are unconstitutional, but the finding applies only to specific municipalities. There are some attorneys that are trying to get this opinion registered on a state-wide basis, but it's not happened yet.
      17Reply
    • Marc RiceBusiness Member
      Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
      5y

      @Kishun Barker

      Check out Columbus, higher appreciation and strong cash flow so when you find a good below market deal and buy it in cash, you’ll have an easier time cash out refinancing and scaling.

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      3Reply
    • Bob S.
      Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
      5y

      @Kishun Barker if you are not cash in the Cleveland market you are not going to get a good deal. So simple refi an get your money back, then do again. 

      1Reply
    • Chris John
      Member since 2020 · 671 posts · 937 votes
      5y

      "Give me a lever long enough and a fulcrum on which to place it, and I shall move the world."

      -Archimedes.

      It's great to pay cash if it's to get a deal accepted, to "save" a spot on a small deal for one of your "ten good loans", etc., but ultimately I'm a big fan of leverage.  When you run side by side analyses of leverage vs. no leverage the leverage will always win...  Just don't want to over-leverage cuz then the lever might break and kill you.

      7Reply
    • Brandon GoldsmithBusiness Member
      Real Estate Agent · Columbus, OH · Member since 2020 · 1k+ posts · 1k+ votes
      5y

      If you are going for the BRRRR method then it would be wise. There are always advantages to leveraging debt, especially when money is currently cheap and available. I would suggest figuring out your strategy first and going from there. Good Luck! @Kishun Barker

      [email protected]614-963-3340
      0Reply
    • Andrew Rosenberg
      Honolulu, HI · Member since 2020 · 196 posts · 190 votes
      5y

      My only caveat would be having adequate reserves. The assumption that credit (particularly short term revolving credit) will always be available played a big part in the making the 2008 Credit Crunch worse. When credit dried up, many players (usually arrogant corporations) with profitable properties had to resort to bankruptcy protection because of cash flow shortages. Credit Crunch was only 12 years ago, hopefully people learned their lesson or study history.

      3Reply
    • James Wise
      Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
      5y
      Originally posted by @Kishun Barker:

      I am interested in buying deplexs in cleveland with 100% cash and was just wondering what tips or advice other investors can point out to me

       The financing is the most attractive aspect of rental real estate investing. You essentially quadruple your money with every loan. Wouldn't recommend paying 100% in cash.

      4Reply
    • Christopher Smith
      Investor · brentwood, CA · Member since 2016 · 1k+ posts · 730 votes
      5y

      @Andrew Rosenberg I was an all cash buyer 12 years ago. It was really helpful then, got me front of the line privaleges every time. They were passing on unqualified buyers bidding 20k to 30k above me just to accept my offer. Those were the days, it was like shooting fish in a barrel.

      What's going on today worries me some, even though its made my properties 3x more valuable than when I bought them. I suppose if I had to do it again I would have borrowed some funds and bought 2 to 4 times as much as I did. To bad we don't have a crystal 🔮.

      7Reply
    • Alexandre Marques dos Santos
      Rental Property Investor · Member since 2020 · 215 posts · 137 votes
      5y

      @Kishun Barker

      Cash is king... so you have power to close quickly. Use that to get discounts on “need to sell” properties. Year end is great as builders need to get rid of inventories... only define as quick as you can if you gonna hold it in a vehicle or under your name to avoid transferring later. If property has association, you might face transfer fees later and could add some undesirable expenses...

      1Reply
    • James Storey
      Real Estate Agent · Indianapolis, IN · Member since 2020 · 103 posts · 112 votes
      5y

      It all comes down to preference and risk tolerance. Contrary to popular belief, adding debt does add risk. Therefor with added risk, there has to be added reward. Thankfully, with low interest rates, the cost of capital is significantly lower then unlevealed yields in today's property markets and in almost any situation, returns will be leveraged in a positive manner with debt.

      In the end, you do you. I have a lot of clients who start off all cash and then move into buying with leverage later. Also, I have people who won't do anything unless they are able to pay all cash. It all comes down to an individuals strategy and risk tolerance.

      James Storey, CCIM

      4Reply
    • Kevork ArtinianPro Member
      Rental Property Investor · Santa Clarita, CA · Member since 2020 · 14 posts · 8 votes
      5y

      @Kishun Barker there have been a lot of great advise on here. I my short one is. Do whatever makes you sleep the best at night and aligns with your goals and vision.

      Best of luck sir.

      6Reply
    • Grey Stone
      Investor · Palmdale · Member since 2016 · 112 posts · 80 votes
      5y
      Originally posted by @Kishun Barker:

      @Mark H. Porter why knowingly take on debt when i can accomplished the same Financial freedom without every having to beg for loan and can bypass all the stress that comes with having a mortgage

      Leverage is an amazing aspect of real estate, ESPECIALLY when interest rates are this low. When you find a great deal and then couple it with low interest rates, it will allow you to grow faster and increase your return on capital. Some feel buying it with cash is safe, I don't. When you buy in cash you can only buy so many. I've learned the more you do RE the better you get and typically the better returns you get. Buying in cash is something I would consider for retirement, if I needed a place to park money or more realistically if I am trying to be more competitive to get a property and will then refi at my first opportunity. Good luck!

      0Reply
    • Andrew Rosenberg
      Honolulu, HI · Member since 2020 · 196 posts · 190 votes
      5y

      @Christopher Smith That's great you had such courage and crash back in '08! I made so many mistakes but buying in '08 with cash got me a low enough price to cover my beginner mistakes. With rates so low why not look into cash-out refi to buy more properties now with rates historically cheap? For me is probably more covid fear than rational math, but we all have to operate within our comfort zone.

      2Reply
    • Steve Vaughan
      Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
      5y

      Listed vanilla properties I borrow even if I don't need to.  

      Save cash for the buys with more gravel in them. Too many repairs, quick sale, odd, commercial, industrial, retail, land, etc.  

      4Reply
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