Hi, So I was wondering what the benefits and downsides would be for purchasing a house in cash vs a mortgage while also renting it out.

First, can you lease a house while still paying a mortgage on it? If I can afford to buy a house in cash, would it still be more beneficial to go the mortgage route? What do the different interest rates mean? I want to buy a house as an investment, would I have to pay it off first before I can lease it out?
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answer by Ryan Huggins    |   Visit My Website   |   Contact Me
There are certain things that you can benefit from tax wise with a rental, I'd speak with a CPA on that. As to finance terms, contact a lender. Cash v. Loan, you can lease a house out at anytime. Most investors I've worked with don't buy rentals cash. Most finance them and let the tenant pay the house off for them. If you buy it cash, you have no mortgage payment, so you have 100% profit (minus taxes, insurance, etc.). In my area, you're looking at 500k+ for a small house in decent condition. That's a lot of money to sink in one place. If you finance, you only put a percentage of that down (say 20%). Just make sure you do your math first so you don't end up with payments bigger than your rent.
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answer by Amy Gutting    |   Visit My Website   |   Contact Me
First I would speak with a Lender to answer your questions about mortgage interest rates and benefits. Even if you talk with a CPA about tax write-off benefits, only a lender can tell you how much extra to pay down the loan monthly to get the best of both worlds. You would need to finance as an investor, and the rates are indeed different for investors vs. primary residence loans. There are also a ridiculous number of different loans out there now, and you may want to speak with several lenders...try to stay local; it costs nothing to talk to a lender, and better to meet them face to face. A good agent in your area will have a list of lenders they trust, and know several property management companies you can speak with to weigh benefit vs. cost. I have worked with some investors who buy a home warranty with the house so when something breaks they call the warranty company 1st to see if it is covered and make appointments directly with company. You will have no problem renting a home with a mortgage on it, as long as you are buying as an investor. You cannot buy a home you say you will move into, then rent it out---it would be considered mortgage fraud. Also keep in mind that some HOAs have rules about percent rental capacities, and especially condos--some HOAs charge a fee every time you change tenants!
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answer by Josie Sarullo    |   Visit My Website   |   Contact Me
San Diego, California - Dunn, REALTORS: Hello, everyone's situation is going to be different depending on how your taxes are structured. This is really a question for your CPA r money adviser. But, if it was me.... I would use the banks money since interest rates are so low then use the tax write off from the interest rate. In CA you can purchase a rental property and still have a loan on it. You will want to run your numbers to see how much of this purchase do you want to leverage cause you don't want to get in the negative zone. Don't buy a home until you check with me to make sure it is a good investment. Agent Josie -
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answer by Matt Pivetti    |   Visit My Website   |   Contact Me
First, it would be a good idea to consult with a tax professional. My initial reaction is that is is likely more beneficial to utilize financing for the purchase, so that you have something to offset the income tax liability of the rental. You would want to make sure that any interest you are paying for the mortgage does not exceed the tax benefit. Also, if you purchase using financing your rates will be lower than if you use cash to purchase and then seek financing in the future. This is because the financing in the future would be considered a "Cash Out Refi", which typically carries higher rates than purchase money loans.
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