With the economic impacts of the pandemic, cash is going to be king for the next twelve months. Here’s why: banks want to lend, but they can’t lend to someone who’s unemployed or behind on their bills. They can only lend to those who have a steady job and are current on their payments. Along with a scarcity of qualified borrowers, there will also be an increase in people either defaulting or selling their homes in favor of renting or buying something more affordable. The lack of buyers and an increase in inventory will spur a drop in demand for houses. When demand drops, so does the price of real estate. We saw this in 2008.
As a real estate investor, this is where your cash comes in. Already having that down payment will reassure the bank that you can take on a loan. If you don’t have cash of your own to put up, you still have options. For those of you who already have investments, you could secure your down payment through refinancing. Also, if you already have some equity in your home, you could apply for a home equity line of credit (HELOC). With HELOCs, you pay interest only on the amount borrowed at the time. In terms of interest rates and closing costs, it’s generally a less expensive way of securing financing than a typical loan. Of course, the drawback here is that you’re spending the equity on your original home, while taking on more debt. Also, most HELOCs have adjustable rates, which can make it difficult to predict your financing costs over time. Another option is to raise cash by partnering with investors. Depending on how much you’re able to raise, you could possibly raise enough money to sidestep the whole process of applying for a loan.
Even if you don’t have enough cash to buy something now, it’s absolutely within your reach. Start putting one front in foot of the other, you’ll find that there are numerous ways to secure cash. It may sound hard, but it’s definitely doable and more than worth the effort as there will be massive opportunities for those with cash.