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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127237  
Subject: Re: Pay cash or not ? Date: 8/26/2001 10:50 PM
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Hi arbockcalb,

Right now, I am rather liquid so I could pay cash if it was a big benefit. (Price, closing costs & such) My question would it be harder to get financed if I bought it outright first?

Not at all. It wouldn't be easier nor harder... HOWEVER you may have some psychological advantages if you could pull $50,000 in cash out of your attache' case and lay it on the coffee table of the seller. If there's ANY edge you could get with a seller personally, that would be the least expected and most visually powerful.

In any event I would only want to finance 75-80% to avoid PMI.

You can finance up to 100% and avoid PMI by using a conmbo loan strategy. Your overall rate and payment will be less than if you financed all or part with PMI, andyou'll be left more liquid... which is almost always the safer, preferrable position to be in.

And in a few months I might want the money to put back in stocks.

As an aside; I saw a statistic in this month's Smart Money Magazine about how, on average, S&P investments made during a recession (when investors are most stung and gun-shy) have made far outperforming returns in the ensuing 18 month period out of recession. I missplaced my magazine, so if anyone else out there has a copy you can quote specifics from, that would be interesting.

(Right now I am a little concerned and thus am more liquid than any time in several years. Plus I had a large position get bought out at a favorable price)

Congrats for a favorable exit!

I am a little concerned about where I can get real real estate advice. Agents make more the higher priced you buy. So will I really get good advice?

Your best advice will be education.. and toward that end you're at the right place on these boards. The folks here can not only point you in the right direction, they'll show you where to find more education and who specifically can help you best in your own best interests.

I mean, should I buy a $90,000 house or a $50,000 house? My priority is getting a below market buy that I can get out of in a few years without losing my tail. So I expect to look at some HUD foreclosures.

There are deals and rip-offs in both price ranges... and everyone who's done anything with HUD homes on these boards say "Run, do not walk, AWAY from these... they are NOT for the savvy investor on average."

I figure I can fix it up as I go and maybe build a little extra equity that way.

If you want to find a fixer to "flip," skip the HUD and foreclosure deals, and simply walk the neighborhoods looking for distressed properties, then find the owners, and take the problems off their hands. That's the simple explanation.. and there is certainly more to it (back to education)... but that's the trick in a nutshell.

I believe Liz has done exactly this very successfully, and I know of several others not on these boards who have consistenly paid their bills and built their wealth by this method.

OTOH I know of at LEAST a dozen folks who've lost their shirts chasing the "easy" deals of HUD and foreclosure hoomes.

I really want a townhouse because they are lower maintenence but they dont hold their value/appreciate as well. I am also concerned that if the market stays week we could go into a recession and housing prices would drop a good bit. For this reason, I want to buy the cheapest thing that suits me. HELP anyone

I would offer, for that reason exactly, you're focusing the wrong way...

Instead of buying the CHEAPEST thing that suits you, you should focus on buying the STRONGEST VALUE (something least likely to depress further.) This is traditionally described as the shabbiest home in a great neighborhood. It's the least attractive to others... and guess what" LEast attractive to YOU TOO! UNLESS you have the eye of Liz and others experienced at the game.

Welcome aboard! this is the place for you!

Cheers,
Dave Donhoff
Foolish Mortgage Broker
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