Buy cash or use Mortgage??

[Pillar Jane Lagrito]

Me and my husband have refi'd our house for the purpose of reinvesting the cashed out money from the refi. We are looking into buying our second rental, and first out of state investment. With the current trends right now, where interest rates are high, and the market is unstable, would you advice buying a house in cash or using a mortgage? If we buy in cash, we plan to lowball and do cash out refinance when the rates get better, and use the money again to buy another house.. But if we buy with a mortgage, we can probably get 3 houses with the cash we have on hand.

[Bryan Escudero]

Quote from @Pillar Jane Lagrito:

Me and my husband have refi'd our house for the purpose of reinvesting the cashed out money from the refi. We are looking into buying our second rental, and first out of state investment. With the current trends right now, where interest rates are high, and the market is unstable, would you advice buying a house in cash or using a mortgage? If we buy in cash, we plan to lowball and do cash out refinance when the rates get better, and use the money again to buy another house.. But if we buy with a mortgage, we can probably get 3 houses with the cash we have on hand.

 Pillar, I would say that it depends on your goals. You want to at least be able to pay off your refi with the cash flow that you have left after your expenses (and maybe a little more to pocket). We are buying properties with leverage now because, as you mentioned, you can get more income sources for the same amount of money. I would make sure that if you are buying three properties, you underwrite them conservatively. Be patient and you will find yourself doing a few things...

1. Getting more experience with each property.

2. Spreading out your risk profile across more than one property. 

3. Creating more opportunities for 3 cash out refi's in a few years. 

That being said, if you do possibly buy 1 larger deal with a mortgage, you can get a lot of the benefits I just mentioned, but also gain efficiency in the cost per unit, you might be in the commercial space which has some nice benefits in how you can force the appreciation on your properties. A word of advise would be to think like an investor and not like a consumer on this. You should look at your numbers and let them tell you the story. You might want to partner with someone who has done this before to give you some information that will give you peace of mind (but you might see less returns). In any case, if you go with commercial, look up DSCR loans which are great for commercial properties (these can be residential or business). I wish you luck on your endeavor. Make sure you study the market and if you are going out of state, get yourself a good real estate agent and property manager. Let me know if I can help you and your husband in any way.

Have fun!