Pay With All Cash If You Have It?
I am closing on my rehab property early next week. I am getting the house for $28K and rehab is $12K.
I have all that money sitting in the bank earning very low interest. I also have a HELOC that I can use to pay for everything and get prime rate of 4.5%.
I don't want to use hard money lenders because they are expensive. I plan to finish the rehab in 1 month and then refinance shortly after that.
Should I just pay for the house and all repairs IN CASH from my bank since I am not gaining much interest anyway? Or should I use the HELOC and still pay the 4.5% interest?
Robert,
If your plan works you will only need the money for one month. Use all cash!
Any work for rehabbers from the north?
Regards, Frank
Of the three choices - cash HELOC or hard money lender, I only see the cash or HELOC as choices.
The HELOC and cash are virtually the same in terms of risk. With the hard money lender if things go terribly wrong they would take the house and that would be about it. With your cash you would loose it, with the HELOC you would risk your home.
Run the numbers and see what would cost you the least. You will lose $X in interest on your cash, you will pay $X in interest on HELOC and hard money loans. Is there a chance you might need the cash for something else? What if another great opportunity comes along while you are waiting to sell the first one? What happens if the property doesnt sell for a while?
Ryan
Ryan, that's just it, it really doesn't matter if you use cash or the HELOC and then something else comes along. Once you have the HELOC in place it is like having cash in the bank, all you have to do is write a check to spend it, the HELOC and cash are basically the same when it comes to availability.
If you use the cash and something else comes along, you just write a check on the HELOC for it.
If you use the HELOC and something else comes along, you just write a check using your cash for it.