I’m thinking about selling a couple of my rental properties. My thinking has DRASTICALLY changed when it comes to debt. To put it simply, I HATE BEING IN DEBT!!! I hate dealing with banks and lenders, and I no longer want to borrow money from banks, or anyone else for that matter. I guess you could say that I’ve had an epiphany… (LOL) =) … So with that said, here’s what I’m thinking:
I now want to buy houses for cash and then sell them. My goal would be at least $20k in profit after closing. Actually that would be $20k net… after all expenses
So here’s my plan in a nut shell.
Cash out of 1 or 2 rentals to get “seed” money so to speak… :o) They have a combined cash flow of about $400.
Go find a deal like normal from my marketing, clubs, birdogs, Auctions, MLS, etc. and pay cash for it. NO FRKN’ BANKS!!! =^)
Rehab/fix like normal
Sell and make my $20k net…
Even if it took me 12 mos. to sell, it would be fine with me. NO MORTGAGE PMTS!!! Current market time obviously varies from area to area in my locale, but I haven’t yet seen an average market time of 12 mos. =) …
Rinse and repeat until I can buy a rental FOR CASH!!! So let’s say that would be 10 deals at $20k. That would buy a decent rental at $200k. In some places that would buy 2 or 3. By the way, I’m a Broker, so I’d be listing/selling my own deals.
I know this is like the “old fashion” way of doing this, so let me know what you think. I’m just absolutely over borrowing money… just don’t want to do it any more.
A couple ?'s
Where would you recommend putting my cash until I find a deal?
What do you think of this strategy in the current market?
Benefits:
NO MORE BORROWING FROM BANKS…
NO MORT. PMTS
EASE OF PURCHASING AND CLOSING
Give me what you think are cons to doing this.
Thanks a ton …
After purchasing and renovating my first property for all cash, I realized it would have been way smarter to use leverage. It feels great to own something free and clear; but, having access to cash is more valuable. Your irritation with the bank is obvious. What’s really going on with your lender? Are they asking for more equity, more financial reportng, a higher interest rate, more liquidity? Credit is getting tighter everyday and lendng policies have changed dramatically.
A better option might be to go with your idea of cashing out 1 or two properties and using that cash for a bigger down payment on the next deal (instead of waiting for 5 or more deals to have enough cash for 1 purchase). Then you have the advantage of cash and leverage.
Thanks for replying gigi. I was thinking of just continuing to roll my money over to avoid banks all together. Then when I have accumulated enough money, just go buy a rental ALL CASH. No banks… no leverage… 100% done.
There’s nothing necessarily wrong with my lenders… I’m glad that they were there when I needed them, but now I just think that I would be fine without them. I just hate being indebted to someone. I’ve always hated it. My mindset on debt has COMPLETELY SHIFTED. I simply no longer wish to be in debt. I want to operate out of MY OWN profits. I want to be my OWN bank. The goal is to never, ever NEED them again.
The way I figure it, is if I can do just 5 deals at $20k per deal / per year, then that’s $100k. So let’s say that I start with $150k. After 1 year, I’d now have $250k. In year 2 I’d have $350k. I’m interested in your idea though:
A better option might be to go with your idea of cashing out 1 or two properties and using that cash for a bigger down payment on the next deal (instead of waiting for 5 or more deals to have enough cash for 1 purchase). Then you have the advantage of cash and leverage.
Can you elaborate a bit? Not sure I understand.
My idea is to buy a property CASH, and then sell for CASH. Once I’ve built up enough Cash to buy a decent rental, buy it for ALL CASH. This way I completely avoid borrowing altogether. Then just repeat the process. What do you think gigi? My goal is to not use anyone else’s money but mine. $20k is just my min. … I actually think that I can average much higher spreads… YOU MAKE YOUR MONEY WHEN YOU BUY…
It’s ironic someone mentioned Steve Cook’s philosophy. I’ve done bus. w/ Steve and we’ve had these discussions many times. There is a certain peace that comes with not having to feed the bank and I agree.
If you have adequate reserves for emergencies (if you’ve rehabbed you know things come up) and you are not too tight on your numbers, and have a really strong exit strategy (I’m a seller now and it’s challenging) personally I think it’s a great plan.
The downside is speed and how many deals you can do. But if you are like most investors you can handle a few rehabs at a time but after that you need some good systems to scale up.
Depending on how many deals you can handle at once going the cash route (albeit slower than leveraging) will reduce the stress level and that is a big part of burnout in this business.
A mix of debt and equity (say 50% financing) could be a good mix if you wanted to scale up and still have a cushion.
Banks are a pain in the butt. Leverage is one of the HUGE ADVANTAGES of investing in real estate. Try generating private money, hard money or talk to small banks. Maybe you can get a blanket loan on your existing rentals or use them as collateral. It is a pain dealing with banks, but the goal is to improve networth and cash flow. Focus on maximizing networth and cashflow and minimizing risk.
Me too as much as possible, I want to avoid acquiring something thru loan. The best idea is to sell some of your property and then get the property you want out from your proceed on the sales.
Sounds great like the wholesaling, all cash is a must but somewhere somehow a buyer needs to pay retail price to make money and how many are there that are not first time homebuyers looking for super low prices and FHA loans since they do not have much of a downpayment. Hearing we have another 3.4million homes coming into foreclosure lots to choose from and new buyers are savvy. In our county last month 8 of 10 sales were foreclosures. We have created a generation of new home buyers that only buy foreclosures. Selling your rentals will be hard to do and maybe a mistake. Long term investment is going to be key. Building equity and tax benifits are on your side. If the 8k rebate ends for good in Dec the new home buyers will disappear overnight. They are the only ones driving what market we have.
