Buy with all cash and then refinance questions?

[Ashish Khera]

Hi All, I have just started out on my RE journey and have 2 properties. One turnkey and one other SFR. Both of these properties are financed with a conventional loan at 25% down. I have a question about financing. Say I’m looking at a 150K property. If I have the cash upfront to do an all cash deal, do you think that is better than doing the deal with a conventional mortgage upfront? My thought behind this is that once I make the purchase I can then pull out the money through a mortgage after the sale. Also, this would give me an advantage during the purchase by offering the seller all-cash and therefore a faster closing as well as the potential to make an offer without the mortgage contingency and potentially get a better deal that way. I have very good credit so I’m not worried that I wouldn’t get a mortgage. What are the downsides to this approach? Do any of you use this strategy? Thank you for all your help. ASH

[Ryan Moeller]

Hi Ashish, cash offers can be very powerful, especially when framed properly.  I've learned from some very successful investors and after trying different methods I've had great success getting huge discounts telling motivated sellers that I have the money already at title and can close as fast as title can move.  I have also told them that I can wire money into title immediately after they sign the contract and again close as fast as title can move.  In both cases it is true and I perform.  I of course have the seller paying for liens, back taxes, judgments, etc as they have to provide clear title.  It works best with motivated sellers, it's almost like I'm handing them a bag of cash and their problem is solved and they can move on with their life.  After adding value via rehab then it is easy to refinance either with a Fannie/Freddie loan (some need seasoning) or with a blanket loan solution.  Ideally you buy at a discount and add value so you get your entire invested funds back and repeat.