I know I know, some of you might think I’m nuts, but let me explain myself. If you discipline yourself to save, it IS possible to invest in real estate with cash. And, not only is it possible, but it will allow you to earn more money with your investments!
Do you know what kind of deal you get when you’re looking to buy a property with 0% down? You don’t!! Since you have absolutely no money, not only will you pay more for the property, but then you will also have to pay PMI on your loan, AND you might even have to pay a higher percent interest! It doesn’t pay to go into real estate with at least some cash.
Now, what if you had $75,000 in cash? Guess what types of homes you can look at? If you find the right deal, you can find a property that’s worth $100,000 with your cash that’s only 3/4 of the value! You might think that this isn’t possible, but you know those homes that are nearing foreclosure? Rather than have a blemish on their record (which could harm the work life and personal life), they’ll be willing to sell quickly to a briefcase that’s full of cash. Wouldn’t you?
The Monthly Income
If you need to borrow money from the bank to purchase a house, you’ll be responsible for making monthly payments to repay the loan. Typically, this monthly payment is only slightly less than what you earn in rent. It’s not very fun to earn a net profit of $20 each month.
If you invest in real estate with cash, you’ll count that entire rental amount as profit each month! Rather than earning only $20, you’ll have a cashflow of $1,000 or more every month – just from one property!
Sure, it may take you some time to save up $75,000, but when you buy your rental properties with cash, you’ll be able to avoid all of those interest payments too! Even with a low interest rate of 4%, you could owe more than double the value of your home over the course of 30 years. That $100,000 house actually cost you $200,000 – all because of interest! By purchasing your properties with cash, you’ll avoid the bank’s interest altogether.
No One Can Take It Away
If you purchase a home with a bank loan, you could pay off 99% of it over the course of 29 years, but if you suddently default on your payments, the bank has the right to take that entire home from you and leave you with absolutely nothing. But, purchase the home with cash and it acts as the collateral to no one! It will always be yours and you can choose to sell it when you want to.
My first investment property will be with cash, how about yours?