By Younas Chaudhary
The most profitable real estate investments I’ve made came from buying properties outright with cash. On average, I’ve made 15 to 20 percent more profit off homes and investment properties that I bought with cash. People will advise you to flip homes, renovate old ones, take out a HELOC or secure loans to buy investment properties but I can tell you, cash is king. Without cash, don’t do it because you could end up with higher debt with little to no equity.
A cash offer means a homebuyer wants to buy the property without a mortgage loan or other financing. They are attractive to sellers, as they mean faster closings with fewer reservations and hassles.
In precarious financial times, with two-thirds of our population having little to no savings, having cash is an advantage. Buyers are finding it harder to get approved for mortgages, interest rates are high, and sellers want to make as much as they can. If you have cash to invest, buying properties in the current market could yield much higher profits than depositing your money in a money market or savings account.
I’ve purchased homes listed for $500,000 at $450,000 by paying cash up front. This immediately gives me a starter profit of $50,000, rental income starts on day one and after calculating tax and depreciation, I should make a 15% profit or more.
You can find unsold homes that have sat on the market for several weeks or months through a good real estate broker or your own online market research. They could be overpriced or there could be other reasons why they have not been sold. Invest your time in research, reach out to prospective sellers, talk to multiple agents, and make ongoing offers. You never know when something lucrative could come up with your consistent efforts.
All investments have risks. So, I recommend the above strategy only for those folks who have paid off the mortgage on their principal homestead residence and have enough cash to invest in real estate.
For those folks trying to pay off your home mortgage, just start adding a few hundred dollars more along your required monthly mortgage payment every month. This brings a lot of savings by reducing the amount of interest you will pay and shortening the life of the mortgage. Sadly, the rules of compound interest favor financial firms and the best way to pay off your home mortgage is to pay down the principal amount faster every month.
Never be a slave to the lender who will dangle a 30-year loan in front of you and tell you that all that matters is your monthly payment. Ask questions, make educated decisions, and don’t be lured by people who want to just close a deal. Shop for lower interest rates from multiple lenders for all your loans. You can also seek help of multiple nonprofits and government agencies who are out there to provide you certain options and advice.
Lastly, know that Warren Buffet, among the world’s richest men has been living in his modest home in Omaha, Nebraska for the last six decades. When asked if he would buy a bigger and better home, his response was…for what?
Always keep your greed in check and know that the true profits come with a mindset of planning, consistency, taking risks, timing, saving, humility, and patience. Stay blessed!
The views, thoughts, and opinions expressed in this article are my own and do not represent the opinions of any entity with which I have been, am now, or will be affiliated. Further, I make no warranty regarding the accuracy or effectiveness of my recommendations, and readers are advised to consult other advisors as well as their own judgments in making business decisions.