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Buying A House Outright With Cash - Page 2

Oh I will not move unless I have the liquid assets to make it profitable for me. I already have two houses. One I live in and one I maintain and will probably occupy in a few years. I am happy with the situation I am in right now.

Cash Outright House Buying

The other one you maintain could probably be rented and then you can use the capital towards your third purchase, but you are thinking straight on this one, I've seen so many make the mistake of jumping in a shallow pool.

Buying A House Outright With Cash History & Civil Business Politics

At todays bargain rates for borrowing cash, if you take a $100k 30 yr loan and take the full term to pay it off...you will still be paying a additional $122k for the loan. With that in mind, if you have the money and elect not to pay off the debt, you had better make sure you are investing and recieving tax breaks that match the $122k payment that you will be making over the term of the loan.

Everyone talks about the tax break, but you will only be recieving a $122k tax break over 30 years. Mind you that this is a reduction of your pay by $122k and not your payment for tax, so really it will be a fraction of this $122k. So on a 30 year loan of $100k (assume you are in a 25% tax bracket), this is a average savings of just over $1k per year... This means you need to be investing over the next 30 years with the $100k you didnt spend on the loan and generate a profit of about $92k. You would only need about a .7% return on your $100k compounded yearly. This is pretty easy to achieve, but in order to justify not paying off the loan you actually have to do it. The money you didnt spend in paying off the loan needs to go into investments or at least a substantial part of it.

This is where most fail. They get the 30 year loan. They could have put more down or paid off the loan in full, but hold back to buy a car, furniture, vacations, etc... That money is never put back into savings and they continue to buy and pay off the loan. In the end, the tax break was not enough to offset the interest payment and they ended up paying way more than they should of, but they have nice stuff and memories to show for it, so it really is a personal decision.

One thing I forgot to mention...if you can somehow get a loan with little to no money down and end up having to pay loan insurance, you are going to have to make a whole lot more on investments to offset the payment. If you have under about 20% equity in your house, you will be forced to pay this insurance and it is not included in the tax break and is quite expensive. You will have to pay for this insurance until your equity becomes 20%.

Edited: Vincenzo on 13th Jan, 2009 - 2:22am

Page 2 Cash Outright House Buying

Thanks for filling in some of those details as we operate very different in the tax break we get none.

What about when a place goes up for taxes over due. You pay for those taxes but get a portion of the home value when its sold or something to that effect. A tax lien comes to mind. I am very sketchy on details and I am just starting to read on it. But it would look like you might be better to put your monies into that rather then an actually purchase. Lower amount but better % on pack back of investment. I think it involves selling it at under market price and making a quick turn over.

If any know more on that perhaps a new thread could be started. Seemed like a quick rich scheme but if done right it would be a slow steady build of wealth.

Cash Outright House Buying

We seem to have some intelligent real estate thinkers here. Too bad this board is not more active I will like to see several of these approaches so detailed.

Buying A House Outright With Cash

I would so love to do that but if I had so much extra cash that I could afford to buy a house outright with cash then I doubt I would be living a mediocre lifestyle.