All Forum Posts by: Jerry Cinor

@Jerry Cinor Hey Jerry. 

Remember the quintessential saying of CASH IS KING?!! Yes, it continues to be so true!

Another emotional pro of cash is that it makes people move quicker! Live really quick!

Hi Jerry, super interesting thread!

A lot of info on the advantage of cash or leverage. In addition to the points others have made, I  buy with cash and self manage because:

You obviously don't pay interest and origination fees, but you also aren't forced to buy property insurance, flood insurance, insurance, insurance.... you get my point

You don't have to let a bank get all up in your business model, sign on endless fine print, and agree to pay them for decades

no one dictates what you need do or not do (possible exception - the IRS).

A sole proprietor with an all cash position and self management. That puts you in the driver seat for sure.

I do a lot of BRRRR and buying cash is key for quick closing and better deal. In a competing market this will give you an edge over others. Sellers that are hesitant will favor an offer with no condition as it is a done deal.

If you hear of a deal that falls through the crack because of financing you can get a good deal. Those people will be devastated as they tough they sold their house. And now here you come with an offer with no financing condition, thrust me that those people don't want the same thing to happen twice and will take a lower price for no condition.

@Jerry Cinor More cash flow to you and you can close a deal faster (without having a lender involved). Though, you'll have to figure in closing and fix up costs in your calculations. Personally, I went into single-family homes to mobile homes buying all cash. Investing in mobile homes has been quite profitable and not having to worry about a mortgage payment every month is definitely a plus. :) 

Cash investors have perceived low risk and higher profits.

Intelligent leveraged investors have low risk and higher profits.

Perception verses reality.

The cash vs leverage debate will always rage on BP.  I'm in the leverage camp but we all have different goals and are in different stages of our lives.

Let's debunk a couple of misconceptions though.

1. Buying for cash increases cash flow.  This is simply not true.  Buying for cash increases cash flow on ONE property but it decreases the overall amount of cash flow that can be generated on that capital invested.
2. Leverage is risky and will take down BP investors in the next crash.  People who get on the bandwagon, buy into hot markets, and over-leverage in cyclical areas are not on BP learning and discussing prudent ways to invest.  We don't need to discuss obvious strategies that are not real investing.  Prudent leverage is way down on the list of concerns for many investors.

On the flip side of the coin, I've heard a good quote about owning properties free and clear.  "Once you have won the game, it's okay to stop playing it."

• Own the property free and clear immediately
• No risk of foreclosure
• No mortgage to meet
• Can keep the unit vacant until you have the right renter
• Can keep the unit vacant if repairs are needed
• Almost all revenue (rent) is profit
• Not paying any interest
• Long-term property value appreciation

• Harder for beginners to buy
• All income is taxable (minus expenses)
• Can’t take advantage of mortgage interest tax deduction
• Reduces cash flow which could be used for other investments
• Risk of property value depreciating

 The biggest pro one has when they are a cash buyer is their offers appear much cleaner & more likely to close to the seller. This can be a differentiating factor in winning the bid on a very hot property. Buying with cash also allows investors to buy heavily distressed assets that would not otherwise qualify to residential or commercial financing.

The con involved in paying cash is you greatly limit your buying power. With the ability to finance you can easily quadruple your buying power. $1 Million dollars quickly becomes $4 Million dollars of buying power with financing. The ability to finance a property is what sets real estate investing apart from other investment vehicles such as the stock marker or bitcoin. Try walking into your bank and asking for a 30 year loan to buy some bitcoin lol.

@Jerry Cinor We are up to 6 houses now. We are just now getting ready to use some leverage with a HELOC on one of the homes. I feel comfortable to do it now because like you said, even if things were to go sideways, I know I can pay for it out of the rents from my other properties.

I do not want to be stressed out which is what leverage causes....a bunch of stress (at least for me.)