Using cash & loan... What's the difference?

[yellowtaurus]

Hi all.
 ???
What is the difference between using CASH and LOAN to buy a house for investing?
What is the advantage and disadvantage of it?
Please let me know.  I'm very new in this investing world..
Thank you for all your help.
 

[TMCG]

not sure exactly what you're asking.

there are many differences between paying cash for a property, as opposed to a "loan".  

i don't want to state the obvious without asking you to clarify the question.

just elaborate a little on your question.

[Bluemoon06]

Real Estate as an investment is no better than any other investment.  It yields about 10% to 15%.  Say you have $65,000.  You take it and buy a $65k house cash and rent it out for $900/month.  All things being equal (repairs and expenses) you get a return of 16%.  If you buy the same $65k house and only put down 10% or $6,500 that same $900/month gives you a yield of 166%.  And better yet you still have $58,500 left.  That would be enough to buy 10 more houses with 10% down.  The strength of real estate is leverage.  That is what makes real estate stand out above other investments.

[TMCG]

that's the glaring difference.  of course, the suzie ormans would say, and rightfully so, that the average person should avoid engaging in using leverage in this manner, due to the risks involved.  to them, debt is bad.

but leverage - which essentially puts the person/business in debt, actually helps the INVESTOR make money.

the bottom line is that most people think they are investing, when they buy a house 5% below market value and rent it out with a "positive cash flow" of $80 a month.

i've been at this for 10 months now and i can tell you this - it takes work to find good investment deals.  in MY experience, good deals are not listed on MLS...

it takes marketing and networking to find deals.  

alot of investors on here are successful because they've been at it for so long.  they have a system in place and it is that system, that they have learned through trial and error, which is their greatest asset.

even if you take the best guru's course in the world, read it through and through, you still have to DO it and DO it right.  

bottom line yellow - try and walk into a bank and ask them to lend you money to buy stock or a mutual fund...that's the difference between real estate and other investments, hence the importance of leverage [just don't forget the risks involved as well].  the greener you are, the more risky it can be.

[gordo2417]

TMCG,

Don't give up on the MLS just yet.  While deals are hard to find they are definitely there for the taking.  You have to act quickly as brokers, realtors, etc. are investors as well and they get access to the new MLS listings everyday.  That's why my realtor hooked me onto the MLS listings so I to get the new listings in my inbox 3 am every morning.  All my rehabs and current rentals (except one was a FISBO) were off the MLS.  Not fantastic knock em dead deals.......but very solid deals that I was happy to jump on.  Don't get me wrong......deals with FISBO's are your best bet.

Nate-WI

[Bluemoon06]

You have to act quickly as brokers, realtors, etc. are investors as well and they get access to the new MLS listings everyday.

Real estate agents are not in the business of real estate.  Real estate agents really don’t believe in the business of real estate.  They see people everyday desperate to sell bad properties and are thus scared to get into the real estate business.  Real estate agents don't have money so they don't invest in real estate.  They just get paid commissions to sell real estate.  This causes their income to be so sporadic that when they have money they don’t invest it they spend it and save it for times when there will be no income.  So they are not your competition.  They do, however, have customers that they will call before listing a property on MLS in hopes of getting both sides of the commission.  That is your competition, not the agents.

[gordo2417]

I think it would be nieve to think that brokers, realtors, etc are not investors.  Certainly not alot of them but even ONE is a competitor of mine.  I have personally met and talked to realtors and brokers at REI meetings so I know they exist.  My point was simply that these folks can be some of your competition so accessing the MLS quickly is paramount if you do alot of MLS investing.  

Nate-WI

[Bluemoon06]

This is probably a function of location.  Where I am, I don't see other investors as my competition.  I have lost deals but I don’t want the deals I loose.  I figure out how much I can pay for a house just like every other investor does.  I look at the fair market value for the house subtract costs and repairs and profit and that is the bid I will make.  I want the house very badly at the prices I bid.  I don’t want it at all for even one penny more because I will not get my profit.  That means that I didn’t have competition for that house.  My competition is new investors that over pay for houses and owner occupants that bid too high.  Real investors can’t do all deals and usually when I bid there is not another investor I am bidding against.  I have had only one where there were multiple bids.  They notified the bidders and asked for our best offer.  I lost.  This was about 8 months ago and when I go by that house even today, it sits empty.  They paid too much for it.

That is why I am trying to educate all investors so that they don’t over bid and we can all make profits.