I've been flipping, investing in real estate both residential and commercial for about the past four decades. Well actually 3 1/2 decades but who's counting?

One question that constantly pops up is; "I have about $180,000 do I have enough money to invest in real estate?"

Or like in a recent forum Fellow BP member posed the question of is it better to pay cash for Real Estate investment?

As an investor you're always looking for a cash on cash return. I have $100,000 out there, what is my cash on cash return?

I have one personal philosophy "rent money especially when the rent is cheap"

I found this meme on some social media platform and hijacked it several months ago but it's very true.

Rent Money

This may be an oversimplification but it's very true so let me apply this concept to a real live flip. In the screenshot below I take a property In Las Vegas and I'm still working on to get under contract. Well my friend and I had it under contract at one number and then after reviewing the condition of the property decided to go back in for a second grind. There is a listing real estate agent involved so when you take her out of the picture. But that's another story.

So we have this property under contract for $235,000, the renovation is $45,000 and the ARV is easily $348,000 we have supporting comps more than one.

Now in an all cash scenario your cash out of pocket at closing plus closing costs assuming the front end the renovation money is $280,000 which does not include holding costs. I typically program out a five month hold for all of my deals, although reality is 3 1/2 months.

As you can see from my application worksheet on a cash basis my cash out-of-pocket is an excess of $280,000 plus holding costs $3067 my cash net profit on the steel would be in excess of $47,000 with a 17% cash on cash return.

This is where leveraging your cash comes into play if I finance to steal my cash at closing is slightly over $32,000 my holding cost over five months are slightly over $15,000 (Paying rent for the money and loan costs). My financing net profit is $26,404 represents a 76% cash on cash return. My loan costs are cheap 2 1/2% LO and a 12% annual rate. But it really doesn't matter because I'm not gonna have the money for that long.

So what would you rather do shell out over $280,000 and make $47,000 and a 17% return, or shell out slightly over $32,000 plus only costs make a net profit of $26,404 with a 76.48% return. I personally think the answer is obvious but it's always good to know what your choices are.