Advantages of buying in cash in the Indy market?

Question

Hi Everyone,

I'm a rookie beginning to do out-of-state investing in Indy. I'm targeting B-Class SFH for long-term buy-and-holds. For those that know the market well, does buying in cash (vs. financing) give you an edge in the market or allow you to buy below retail prices? Or is there not much of a difference?

Thank you in advance!

Daniel Schiller · Answer

sure. they are viewed the same as cash by any seller when you don't check the 3rd Party Contingent box; and generally can close immediately following your EM / inspection period. some of the other commenters are saying cash-only, but from their perspective it doesn't matter and they wont know where your funds are coming from unless you go with a conforming loan. It's no different than drawing margin on a brokerage account, then doing a traditional refi 30 days after closing. regarding how they work, you stick to regional banks and only provide your personal balance sheet, LLC info and minor items for the loan... but it will be with a personal guarantee until you build a large enough relationship. so you make that relationship, find your deal, work the numbers, send them to your banker with a brief pitch and overview, and that's it. I haven't been turned down once. That said, I did buy my first MF property with a loan against stocks, then did a refi via portfolio loan. proving you have the cash and collateral makes the process of building banking relationship much easier.

Daniel Schiller · Answer

If you have the cash to consider this, you should just go to a regional bank and get a portfolio loan / non-confirming / in-house. Then you are signing the deal non-contingent on 3rd Party financing and it’s the same as cash from the sellers perspective, which will put your offer in a more favorable light.

Matt S. · Answer

@Daniel Schiller would you mind expanding on how portfolio loans are the same as cash (from the seller's perspective)? I'm new to this and learning about portfolio loans, but I haven't seen anything on how they work (more about when you need them and how to find them). Once it's approved, are you drawing down funds like a line of credit?

Ali Boone · Answer

Cash will always win out over financing if there's a bidding war or preference by the seller. Just because the property can then close a lot faster and with less headaches/drama from lenders. As far as whether it will allow you to buy below retail when financing won't, I think that depends on exactly the situation. If there's a bidding war then the cash buyer might be able to get it less than the financing buyer but that may not necessarily mean below retail. And then the condition of the property matters in terms of retail. Etc. So it just kind of depends.Is your question just in regards to putting offers in and purchasing the property, or does it go further into owning the property? Like if you bought for cash to start, would you just leave all your cash in it or would you refinance it after the purchase so you are leveraged on it, but you used the cash to secure the property initially?

Ritch Bonisa · Answer

I buy and sell some myself. I want cash. I don't want my cash tied up for 60 days on conventional financing. Don't want to wait that long for a close. When you hear investors, wholesalers, etc. talk about cash deals - what they mean is - no seller financing & whatever you have to do to have the cash available in a few days. Alot of times if you don't have cash, you can lose out to someone who does. It's actually worth it so sell for a little less and be able to turn your cash.

Erin Carpenter · Answer

@Daniel Schiller Thanks for the tip, I will definitely investigate this.

Bijoy Shah · Answer

From my perspective, cash always wins. The closing time is short, which is favorable for the seller or broker (disclosure: I broker investment real estate). In my experience, most properties are priced lower for cash deals. Sellers I've dealt with don't like money being tied up in the process. This has provided benefit for my investors by opening up a more favorable equity position, as well. In hand, I've had investors expect to hold, but have found offers to enter the retail market are worthy of review, with a much more favorable financial position.

Jeff Schechter · Answer

Disclosure: PartnerWe only sell our TK properties in Indy for cash, as it allows us to sell more properties, and have faster closings. We price our properties accordingly...we can afford to sell for less when we accept only cash. That helps the investor in two ways....better ROI performance, and better equity position in relation to market prices.