Are you thinking of buying an investment property but aren’t sure if you should use your own cash or a Hard/Private Money loan? As there are some benefits and disadvantages to both, we’re hoping this blog can help you choose which one you want to use.

CASH

PROS

Faster closing – 

When you are using cash, you can typically close on the deal in 7 days. If you are working with a lender to finance the property, it can take 30+ days to close the deal. 

Higher Offers – 

In most cases, if you are using cash you are able to make a higher offer on the property because you don’t have to worry about the interest and all the money going into the loan every month. 

More Control – 

You don’t owe money to anyone, there is no loan on the property so there is no chance of a foreclosure. It’s your property and you can do whatever you like with it. 

Vacancy and Cash Flow – 

When you have a loan on a property you have monthly mortgage payments. With no loan on the property all of the money you are bringing in is going into your pocket!

FINANCING

PROS

Leverage –

If you find a good enough deal to spend some extra money, using someone else’s money is a great idea because then you can put your money into a different property. 

Beginners – 

When you purchase your first or second investment property, it’s good to work with a lender to get the gist of how they run their numbers and complete their due diligence. They will insure the deal isn’t too risky. 

Tax Deductions – 

Tax deductions are a blessing to folks who invest in Real Estate. Mortgage interest is a taxable expense! Be sure to take advantage of this when you are using financing! 

Risky – 

Your lender will make sure that you’re getting yourself into a safe investment. They will help coordinate the appraisal, make sure your numbers are right and help you. CALL US!

CONS

Risky – 

All investments are risky but when it’s your money, money you are depending on, you have a higher risk because you can’t predict what the market is going to look like in the future. If Market Prices decrease, your money will be tied up.

More properties, more money! – 

When you have all your money tied up in one property, you won’t have money to buy other investments. If you are limited on money and plan to keep investing, we would suggest you get a loan! Call us!

Taxes – 

Like we mentioned above, when you finance a property there are tax advantages. When you don’t use a lender, there are less tax advantages which can oftentimes be a big hit when tax season comes along. 

CONS

Risk of Foreclosure – 

It’s not your money in the property, it’s someone else’s. If something goes wrong with your property and you can’t make the payment, your lender can foreclose on the property and take it from you. 

Interest – 

Not only will you be making payments to pay back the money you borrowed, you will also be making interest payments. Borrowing money isn’t free and can sometimes get really pricey! 

Locking Down the right Loan for you – 

It can be really tough to find a loan that fits your needs, especially if you don’t have good credit, money to close, experience with investments, etc. Although, that’s what we do, we find the right loan for you! Call us! 

There it is, laid out for you! Now the decision is yours! If you have any questions or don’t understand something, we’re happy to help you! If you think that financing would be your best option, call us! We would love to help lock down a loan that fits your needs!

Thanks for reading! 

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-Legacy Frontline Team