Welcome to BP @David Ronquille!
Your investment objective is an important part of your decision in what's the best option for you David. By that I mean, what are you trying to accomplish? Whatever you decide is best for you, I can say, you should keep somewhere in the ball park of 20% of your cash as cash reserves for the unexpected - and you should expect the unexpected.
I'll give you my take on three big factors:
1. YOUR CASH
As a cash buyer, you are at the head of the line when you make offers. BUT, there are a lot of cash buyers out there and proven ability to close is a factor in which cash offer is better than the next, when all other things are close or equal.
a. Flip. Having cash on hand gives you options. You have the funds to put "skin in the game." A term used by hard money lenders (HMLs) to require that you have something to lose if they deal goes bad just like they do. HMLs will fund a flip project when you have money to put into the deal and that will allow you to take on a larger project that requires more than the cash you have on hand. Experience is a prerequisite for most, so while it opens some doors, it won't open the floodgates of deal funding.
b. Rental. The cash buying advantage goes well when paired with my next point.
2. YOUR CREDIT
a. Flip. Your credit will be a factor with many PMLs when you consider that way of funding deals.
b. Your credit, if good, can give you some options that are very attractive for buying rental properties. With your good credit, you can buy with your cash and then refinance with a smaller bank or credit union who will finance this "unconventional" strategy. Then you put your money back to work on the next one and repeat as you build your portfolio of income producing properties. There are a lot of details to make such a strategy work, but I'm just offering an overview to give you some food for thought.
3. YOUR TIME
Do you have time on your hands, as in being retired or semi-retired. Does your job or business require a lot of hours/week or do you work a steady 40 hours and make a high income? This goes back to my question of what are you trying to accomplish.
a. Flip. Especially when you first start, it will take a lot of time to manage the renovation projects that often come with any properties you buy. There are the rare exceptions when you buy properties that need only paint and flooring, but usually the distress that creates the opportunity is a matter of the condition of the property.
b. Rental You will see the greatest returns on paper, for the hardest properties to manage profitably. If you choose to buy rental properties, you will need to decide if you will manage them or if someone else will? Thinking of buying the highest ROI properties in the rough areas and just handing them over to a PM and let them take the punishment, is a common mistake. The difficulty of finding a good PM company is one of the most common complaints you will hear from investors. Sometimes investors are looking for others to work miracles for 8-10% of monthly rent. If your personality, time available and strategies make PM easy for you, you may enjoy managing your own properties? There are advocates of either if you ask, but it comes down to an individual situation and decision.
I feel like I need another paragraph on YOUR TEAM that addresses a lot of the concerns I mentioned, but I already feel like this is too long. I hope this helps you figure out what you want to do? Pace yourself. Do your homework and make sure you keep that cash reserve I mentioned, you will be glad you did. Only invest in what you understand. Don't do anything with your money because I said so or anyone else says so. Do what you understand well enough to be confident of a profitable outcome. Feel free to reach out any time I might be able to be of some help to you - I'm always glad to help when I can!
