Buying all cash and then finance

[Fran Arti]

Yesterday a somebody told me that he could have bought an apartment building in my city during the lockdown with almost 30% discount because the buyer needed liquidity urgently. This rose up a question in my head. I though about two options. Lets say that property´s value is $1M so the purchase price is 700k, paying all cash. The 2 options are:

- Buy it all cash and enjoy its cashflow and looking to finance it and cash out to have liquidity to invest in another option, having the building as warranty.

- Buy it all cash, get rid of tenants (they are on month to month leases), rehab it entirely, get rented again 100% (higher rents) and get financing, taking advantage of the increase in value/higher rents.

Is this savvy enough? What would you do in this scenario?

Thanks

[Jason Wray]

Fran,

You could always hold onto a portion of your cash and finance the other portion.  You can expedite a purchase with a larger down payment and close in less than 30 days.  Unless the seller was trying to unload with a cash only offer with no contingencies.  But I would have my radar on for any pending litigation against the property or management.  Not likely but just as a flag that generally goes up due to flash sale.  Could always put $350K down finance the other $350K and do a rush closing.  Something to consider for the renovation process and to be a little more cash fluid during the renovation process.