Buying With All Cash
I Have The Lucky Opportunity To Get My Hands On A Large Sum Of Cash And Was Wondering If Anyone Has Found To Have A Better Success Rate With People Wanting To Wheel And Deal If You Offer To Buy Their Property With All Cash, Rather Than Using Sub2, Lease Options Ect. . I’m Wondering If I Would Be Wasting My Time And Money Heading Down This Avenue With Sellers. Personally I Would Think They Would Rather Be Cashed Out Immediately, But Maybe I Was Missing Something. Any Insight Would Help, Thanks 8-)
It works for me when buying REOs.
Cash is always King, and you are fortunate to have so much, though I think it's more fun working without much cash (not that I know any other way). There's a temptation to say, "gee, why bother investing at all", but I'll assume you have good motives. No one here will be very impressed with your resulting profit margins, though, unless you're employing at least one creative leveraging technique now and then. Or At Least Buying Some Of Our Properties That We'd Like To Unload...
Are there bad motives for investing? Pretty much only 1 motive I know of, to make money. I don't know what this persons situation is, but being able to pay cash for a few properties is a long ways from not needing to invest any longer. I pay cash, I also drive an 11 year old truck, spend every free moment fixing some junk house, watch every penny I spend, and have taken my wife on 1 vacation in 20 years of marriage.
I don't think if some people on a discussion board are impressed with your creativity in making deals or not is a priority, I should pass up a good deal unless I can do it creatively? We should look down on this guy because he isn't going to do a sub2? I'm not very creative at all, I buy I fix I rent. This board is still useful to me, and I believe I have useful input to add on certain topics. Don't be a hater.
Its always good to negotiate with cash. Then again, no one knows its for real until you tell them you are ready to close as soon as the title report comes back. Its more of a timing thing. The quicker you can get it done the better. If you need any help unloading some cash, private message me..
A-
Cash or access to cash is useful when the pressure is on.
Example: I have been calling on this man in foreclosure all the way from day two to now three days before the big day;
foreclosure.
All this time he has sneered at me and jibbed me cause he knew he could refinance. Not a problem. Well it was and is a problem. He cannot get any money all he can do is lose out and in this area the foreclosure will go to first bidder, cause the syndicate will stop it off and take it down the street and the access bidding will belong to them. Unless I step in and cure the foreclosure. Now at this moment I need cash. It is truly king. I have lost deals at this point as some large monied type steps in pushes me sideways and takes the deal cause cash has to be used.
Now three days away from foreclosure his attitude changes. He opens the door invites me in and I tell him what I can do. I pull out the papers and he signs. We as this is California now go to the Escrow which is expecting us. He signs deed and Agreement to sell. I dictate the note he will carry back. No payment for six months then a monthly payment and a due date in three years or sooner.
It took this long. It took the pressure of a total loss and within a few days. He was expecting the great hand of God to drop down and save him. The clouds would part etc. etc.
This seems to be rather standard nowdays. People are getting more and more exposed to Real Estate Speculative Methods. But the enormous crippling effect of intense fear and no where to turn finaly have an effect and he becomes workable. The transaction is completed.
Cheers. tired Lucius 8-)
Don't let your money go to your brain because next it will go out of your wallet. Use good solid business judgement and execute your offers based on margins, spreads and profits. You will be amazed at how much equity you can create in properties by being a hard nosed negotiator with banks on REO's.
Examples: #1) Bank asking $122,900, intial offer $85,000, purchased $93,500, market value $130,000. #2) Bank asking $80,000, inital offer $45,000, purchased $50,000, market value $85,000. GOOD LUCK!!! 8-)
Good day to you:
Cash is KING, but look at it as an opportunity to take your dream of RE investing to the next level. Do you want 5 properties with an income of $ 3500 +- or would you like 50 properties with an income of $ 100.00 each?
I have done both, I couldn't wait until I had accumulated enough cash to buy a property. What I realized too late was that I could have bought 10 houses that cashflowed more that the one house did, for the same cash outlay. I could have had appreciation on 10 houses instead of one.
I have seen the error of my way and now have 13 properties bought with CASH, (someone elses, the Bank). I got smart and re-financed the one house, and used it for leverage to purchase the other 13, most getting cash back at closing.
I now use cash to help with the owner's moving expenses, say $ 500 to $ 1000 per house.
Life is GOOD
Good luck and make $$$
Tom
Quote:I Have The Lucky Opportunity To Get My Hands On A Large Sum Of Cash And Was Wondering If Anyone Has Found To Have A Better Success Rate With People Wanting To Wheel And Deal If You Offer To Buy Their Property With All Cash, Rather Than Using Sub2, Lease Options Ect. . I’m Wondering If I Would Be Wasting My Time And Money Heading Down This Avenue With Sellers. Personally I Would Think They Would Rather Be Cashed Out Immediately, But Maybe I Was Missing Something. Any Insight Would Help,
vwtype,
Whether you are doing a Subject To, a conventionally financed deal, or bringing your own money to the settlement table, the net effect is the same -- the seller gets his net sale proceeds ALL in cash.
What might make the difference when you have access to sufficient cash to close the deal, is your ability to make your offer without any financing contingency and you can close quickly.
Your investment strategy might dictate whether you should invest all your cash in one or a few properties. My rule of thumb is the longer I am going to hold the property, the less of my money I want invested in the deal. I am basically a buy and hold for rental income guy, so I want maximum leverage to minimize my out of pocket investment. If the property is to be flipped for a quick profit, then I would be more willing to use a lot of my money to close the deal.
This does not mean that all my rental properties are leveraged to the max. They aren't. I buy below market, with 80% financing. I just let my tenants pay my mortgage and over time I will eventually own the property free and clear -- generating more cash flow than needed to maintain my lifestyle
There is an erroneous assumption here. That is that the reason that people use debt to buy real estate is that they don't have cash. You expect to have cash and therefore believe that you do not need debt.
But debt has all sorts of uses and advantages in real estate other than making it possible to buy when you don't have cash. I suggest you do some research and find out what those advantages are. Then you will be in a much better position to make this decision.
Hi, be careful! Many times cash is substituted for brains with the loss of the cash! Kiyosaki says that if you can't make money without money, you shouldn't invest your money and I agree. Your most important skill as an investor is being able to locate Very Motivated Sellers. If you have the cash without the knowledge and experience, you may be tempted to part too quickly with your cash.
Chill, put the cash in a money market fund until you get some more experience. That is my two cents!
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[ Edited by rajwarrior on Date 05/14/2004 ]
Why focus all your energy and money into that one property? I would always use the cash option as a last resort.
VWType,
What they are really saying is they want out and want to get their equity out to move on to other things. This is where asking "What are you going to do with the cash?" might give a clue as to how you might be better able to give the seller a *better* deal. After all, where can they deposit their new found cash and get 7-10% in return?
I hear a couple of things from the others in this thread.
1. Why put down *all* of your money, when the bank is more than willing to loan you the money? And if they aren't, maybe you should reconsider the deal too (that's just my opinion).
2. No matter how a deal is financed or done, the seller ultimately gets cash. It kind of silly really when a seller says they want cash. Like they were going to get paid with Monopoly money instead
3. Leverage. If for example I had 100K in inheritance. Why would I put 100K down on a house for $100,000, when I could put down 10K on 10 houses. If we took a conservative appreciation of 6% (conservative at least for CA), if I had only purchased 1 house for 100K, then my appreciation would be 6K at the end of one year. But, if I purchased 10 houses with 10K down on each, then I would have made 60K in appreciation my first year.
Having said all of that, I'm in a similar boat as you. I have an inheritance coming, but I'm afraid I will spend it foolishly and a stupid investment deal. So I'm hoping to get a couple of deals under my belt before I either receive it or take advantage of the money.
HTH,
Robert
[ Edited by robertt on Date 05/15/2004 ][ Edited by robertt on Date 05/15/2004 ]