The Pros and Cons of all Cash Purchases

[Geren Williams]

Background - in 2006-2007 I owned a primary residence and 6 rentals. I did not study a lick and made every conceivable mistake that a newbie investor/landlord could make. I was over-leveraged, did no deep deal analyses thus did not know my numbers, not enough reserves, bad tenants, wanted to manage everything myself on the cheap with a full-time job and new family. The crash wiped me out. But I loved real estate. These past several years I’ve saved and invested well. Part of that I put aside as a war chest to get back into investing. My goal was to buy properties all cash and take the risk of being over-leverage off the table.

BP has been a wealth of information and I know that there are other trains of though. But I’m once bitten and now twice shy. Any strong opinions against all cash purchases?

[John Warren]

@Geren Williams I disagree that using a mortgage is the biggest risk. As you mentioned, having buildings in bad areas with bad tenants or not having adequate reserves are MUCH bigger problems than having a mortgage payment. If I were in your shoes, I would focus on buying in the best areas you can afford. Get solid properties that are purpose built. Focus on getting the right tenants in place, and don't be afraid to maintain/over maintain your properties. If you have great buildings in great areas that have been well maintained, you will not lose them.