Cash Real Estate
By Steve Gillman - 2011
(2013 update at bottom.) There are some distinct advantages
to cash real estate deals. The carrying costs are low while you
wait for good tenants to move into your rentals. If you buy for
yourself, you have no monthly mortgage payment, making foreclosure
less likely. But can you do a cash deal?
It may not be as difficult as you think. Prices have been
falling for over five years now (this is being written at the
end of 2011). In certain areas they are off by more than 50%
from the highs back in 2005 or 2006. This is especially true
in the condo market.
The trend is becoming clear; more people are paying cash.
As reported in The Los Angeles Times;
All-cash buyers grabbed a record 30.9% share of California
house and condo sales in January. In Southern California's most
expensive communities, cash deals now account for as much as
two-thirds of home sales...
The trend is being driven by several factors, analysts
say, including the difficulty of getting a "jumbo"
loan from lenders still stinging from the mortgage meltdown.
It also reflects speculation by wealthy investors who believe
home prices are at or near a bottom.
Some investors are buying foreclosures for cash to get the
best price possible, and then flipping the houses after cleaning
them up. Of course, if you are looking for a home for yourself
you can do something similar to grow your assets quickly.
This is certainly not just a trend in California, either.
In Southern Florida only 13% of sales were for cash in 2006,
while more than 50% of recent sales in many areas have been for
all cash real estate deals.
As an investment tactic for getting a fact close and a low
price, you don't necessarily have to have the cash either. If
you have significant equity in your home you might refinance
to pull out the $50,000 necessary to buy a newer three-bedroom
house in Fort Myers, or the $30,000 needed for condos in many
parts of Florida. With those prices and rents which are generally
rising, you will have no trouble getting cash flow even after
the mortgage payment. It may just be time to try your first (or
fortieth) cash real estate deal.
2012 Update: Cash sales are still a large part of the
market in many areas. Investors coming in and buying rentals
for cash may indicate a bottom in prices is near in some areas.
If you want to consider your own cash real estate deal--even
for your own home purchase--see the page; Buying
a House without a Loan.
2013 Update: Cash sales are still a huge part of the
market here in southern Florida where we now live. In fact, cash
is often the only way to buy a "short sale," and is
preferred by banks in the case of foreclosures they own.