Cash money is the best money, right?
Even though a house costs the same no matter how you pay, cash gives you more options. With cash, you don’t have to use the entire amount towards one property. Instead, you can diversify your investment and bring more return. So whether you’re looking to hard money lenders for real estate investing or you have your own nest egg to invest, here’s how to make the most out of the cash.
1. Split Your Cash
Real estate is a leverage game. Let’s say you have $100,000 cash — you choose how to leverage it.
Sure, you could put all $100K in one property, but you could also split it and buy several houses, using the cash as your down payment for the loans. Once you take everything into account (rent, appreciation, and depreciation), you’re better off to divide the cash into multiple investments.
Maybe you wonder whether you'll still make money if you have a mortgage. The answer is yes! The goal is positive cash flow. That means you’re making more than you spend each month.
If a house doesn’t have positive cash flow (even with your mortgage), don’t buy it! Don’t even consider homes that only profit in long-term projections — it’s not enough. Do not buy on speculation, waiting for appreciation. Always buy based on immediate ROI.
2. Make Money When You Purchase
A mentor once told me, “You make your money when you buy your house.” That’s the cornerstone of my investment philosophy. Positive cash flow is a must. Even if you only make $100 each month, that’s okay. You’re still in the black.
But don’t buy thinking, “Next year, rent will increase, and I’ll start making money.” You never know what’s going to happen. It’s like buying Bitcoin right now. Sure, it’s seems promising, but there’s too much uncertainty to call it a secure investment. However, if you make money when you buy, you’ve already profited.
Even in an up market, you make your profit when you buy a property. As long as the numbers work when you buy it, you’re in good shape. And if appreciation and increased rent happens, that’s just a bonus.
3. Focus on Numbers, Not Emotions
If you can’t separate emotions from the numbers, you’ll never make it in real estate investing. Look at the spreadsheets even more than you look at the houses. What makes sense on paper? No matter what your feelings are about the house, make your decision based on the math.
4. Stay Focused on Your Goal — Always
If the goal is to have X amount of cash flow, only buy a property that brings that amount. If you buy a property on speculation of short-term negative cash flow but long-term profit, you’re not focused on the goal. That’s how people get in trouble in the housing market.
When you’re bringing in cash flow, it doesn’t matter what happens to the house value later — rent is already where it needs to be. Even if the market drops, you’re still making money on rent. Don’t let anything deter you from your goal of positive cash flow.
Cash gives you leverage. And the more leverage you have, the better. There’s no 100% guarantee for profits in real estate investing, but making money on the purchase is pretty close. If you use your cash wisely and stay focused on immediate ROI, you’ll put your cash to good use.