Invest in Real Estate With Cash

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!

The Purchase

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!

Avoid Interest

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?

16 thoughts on “Invest in Real Estate With Cash

    1. Yep. For some reason, the word “leverage” sounds smart and sophisticated. I know that I’ll be using cash for my investments.

  1. With the exception of calculating the change in equity as part of the monthly income, I can’t necessarily disagree with your assessment.

    People might succeed at the highly leveraged game, but that’s a bit too much like gambling for my taste. If I was going to buy as an investment, I’d buy in cash.

    1. Sounds like we’re on the same page SFH. Sure, it may take some time to build up the cash, but if you have a goal and you really want it, you’d be surprised how quickly it could happen. 🙂

  2. I couldn’t agree more! I take everything earned from the two free and clear properties I have to save for the next SFH. I am on a 15 year plan to obtain 7 properties and will then be able to keep and utilze the income received, but not until my goal is reached. Wonderful post!

    1. It’s always great to meet someone that is actually doing what I write about. Congrats on the 2 income properties and good luck on the next 5! Stay in touch!

  3. I am not saying have paid off real estate is bad but you are missing the boat if you are using no leverage at all. That is just a waste of cash and cash flow. Even at a 50% LTV in 2 properties you would be better off then just one paid off in full.

    1. And what if zero out of your two properties have renters? Then what? Then you are definitely losing. If you pay for one with cash, it’s a lot tougher to lose money. It’s just safer, and I like safe investments.

    2. I must see things differently because a waste of cash flow to me is paying interest on a loan. Instead, paying cash provides you a higher monthly cash flow that could be saved to purchase the next investment…kind of a snow ball effect. This topic has been hased and re-hashed a million times and it just goes to show that you cannot judge people based on your own perceptions…even if the math seems correct : )

      1. I completely agree with you Troy. Paying for a house with cash can severly increase cash flow. Once that cash starts coming in, you can quickly reinvest in that next property! Thanks for the comment!

  4. I’m 28yr, live in Southern California and make $100k a year. I just bought a house and owe $100k with a 30year loan. Say if I pay my house off in 15 years and save another $100k in 15 years I can have my first rental property (if I could find a house for 100k here). This does not sound that good. My uncle is now 45 and has 12 rentals. He has made about the same income as I do (I have the same job as him) and he did this by getting loans. Are you just talking about risk here in your article? Having one rental by the time I retire just sounds bad, am I missing something? I’m just looking for help, thank you!

    1. The idea is to pay off each house incredibly fast so you can avoid the risk of loans. With my plan, I’ll have 10 rental houses in less than 20 years and then will have enough income to add 1 house each year with cash. If you go with loans, you can certainly be successful, but there is more risk because you are forced to make that mortgage payment each month. Keep me posted on what you do – I’m always interested in hearing about my readers’ experiences with real estate!

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