Purchasing Properties in cash

[Roman Stefaniw]

Hello all. I was wondering if anyone purchases properties in cash and what the pro/cons of this would be. I purchased a duplex at the beginning of this year in the pursuit to begin my road to financial freedom. After reverse engineering the amount of properties it would take for me to become financially free i was a bit overwhelmed. It would be between 30-40 properties cash flowing 100-200 each. The area i'm investing in has houses as low as 30 000 up to 300 000$. I was thinking it might be a smart idea to live frugally for the next 5-8 years and save as much money as i can and purchase properties in cash.

I figure it would take relatively the same amount of money as purchasing 40 properties but i would only have to purchase 1/4 or a 1/5th of the amount to create the same amount of passive income. It would probably take about the same amount of time or maybe quicker as your money would start snowballing after owning a few properties. 

I was wondering if anyone uses this strategy and if you have any advice/pro's/cons for choosing this path. Thanks! 

[Peter M.]

The pro of using cash is you close quickly, there is no lender requirements, or financing contingencies. If you were selling a 150k house which would you take? All cash offer for 140k, close in 7 days (provided the buyer shows proof of funds) or an offer for full price, 3.5% down FHA loan from someone who just has a pre-approval letter, close in 30 days, risk the financing falling through and having to start all over? In most markets right now both would probably lose though because someone would offer above asking cash because RE is so hot right now. Cash is king for this reason.

Don't leave all your cash in a property. Pay in cash for the ease and speed of the transaction then refinance it to get most (preferably all or more) of your money out and do it again. You'll reach your 40 property mark much faster by leveraging than saving up cash and buying every single one outright. Living frugally is a good idea but honestly how much cash could you save in 5 years by "living frugally"? Probably not enough to buy a property you would live in yourself...