Is it safe to buy a home with Cash?

Question

I need HELP!! I'm not sure whats best. I'm planning on buying a 63K home in cash but i keep hearing negative stuff. Any expert suggestions?

Disregard the previous details> My plan is to buy a home with (Check-All paid for) and then rent the house out and make profit. Smart or Dumb?

Answer 1

It is always safe to purchase anything you want with all cash. If you are using the house for an investment and you want to make a wise investment.

If you want to invest in real estate the wise way to invest is to use leverage. In other words the least amount of out of pocket expense you are allowed.

A good move would be to purchase two houses at $63,000.00 and putting approximately $30,000.00 down on each if you insist on just spending your money. or take it a step further and purchase 3 and put $20,000.00 down on each.

Under the circumstances at this point you will now be collecting rent from 2-3 houses, your net worth would be in excess of $189,000.00, depending on how many houses you decide to purchase. You would write off the taxes as well as the interest on each mortgage, there is also a yearly depreciation that is deductable.

Just remember that landlording is extremely dificult. You need to purchase a few books on landlording.

You might also join the local Apartment House Association. It will be very valuable, also assiting you with rental agreements as well as local law concering tenant and landlord relationships. The cost to join is not all that great and it is tax deductable on your income tax.

You should contact your tax preparer or cpa for tax advice.

I hope this has been of some use to you, good luck

"FIGHT ON"

Answer 2

Paying all cash isn't a problem. Suggesting he launder money is illegal! Cash is legal tender and he do what he wants with it, including purchasing a home for cash. Even if he runs an all cash business he should still have paid his taxes so there shouldn't be a problem. If this person is a criminal and not paying the IRS then a phone call to your local IRS office and a 10% reward would be appropriate.

Answer 3

How do you make money (even with a tax savings) by paying the bank interest. If you are able to outright buy a property and rent it out, its like an instant cash flow (as long as tenants are good.) Sounds like a good plan as long as purchase payment is more traceable than a cash payment. These guys that think paying interest is great probably have no money. Every month with good renters will be like a bonus. Lots of investment after that. Even if you have a mortgage and the furnace breaks you still have to shell out money to fix it. Hard to do it if yours is all tied up in mutual funds and you still have a mortgage payment.
P.S. no expert but I have a mortgage and would rather not send the bank interest as opposed to having that money in my pocket less 20-30% in taxes. By even bad math that leaves me with better than 2/3 of my money not going to interest.

Answer 4

Just one thing to add, use a certified check from a bank to make the "cash" payment. With the drug money running around, if the person you pay the cash to goes to spend it and it didn't arrive in their hands via a check or wire transfer they are going to have a hard time spending it and you may be investigated in the long run.

I made the mistake of getting paid by cash once, never again...

Answer 5

To buy a house without a loan is perfectly fine and happens all the time! Why would you want to incur a bunch of closing costs associated with a loan if you don't really need one? As others have mentioned interest on a loan is deductible, but rental income offsets that deduction!
Of course you should do all the due diligence work that you would do on the purchase with a loan (inspections, including termite, appraisal, title search, etc). Don't forget to call the insurance company before you close!

Answer 6

Is it safe? I don't know but I don't think its that smart...If you put 20% in your case 12,600 down and finance the house with a reputible bank you are left with 50,400 to invest in something that will make you money. Sure you will pay interest with your monthly payment but in an aggressive mutual fun that 50K will make much more. Also unless you have a large disposible income after the 63K you should have at least 10K for incidental expenses like if the furnace dies or the roof caves in.

Just my opinion

Answer 7

Hi there, I am not a financial adviser but I would tell you not to do that.

You can trace a check you can't trace cash.

And he/she might offer to get you a deal but I would be more worried about protecting yourself.

If you need more advice go into a bank and ask them what they think.

Good luck!

Answer 8

Don't do that, get a mortgage. You can write off the mortgage interest and you can use your money for something else. Why tie it all up in the house if you don't have to?

Answer 9

Go thru escrow or a title co. so you have a paper trail.