When it comes to real estate, back in the day there was no conventional financing for homebuyers or business properties. If you had cash resources available, you could do business; if you didn’t have money, you needed to find a partner or you were in trouble. In recent decades, conventional financing became easier and more readily available, but today, banks have tightened up. Money is still available for financing, but if you want to be out there and compete successfully for a deal, Cash is King.
And you need to have a nice amount of cash. Most properties in Brooklyn are around the $1 million plus mark so you need to show your down payment money. The bank also wants to see that you have money, so that if something goes bad, you have a way to sustain yourself. When it comes to real estate, cash is definitely the thing you need if you want to get deals done.
When you are competing against someone who is applying for a mortgage or other financing, you are going to have an edge if you have cash. It doesn’t mean the only way to do deals is with cash, but you will definitely have the competitive edge. Sometimes even if your offer is lower than the asking price or other offers, you can get in line because cash marks you as a strong buyer/investor.
Having some kind of letter that you’re preapproved is not the same as having cash. We’re talking about either a private lender, cash in your bank, or a line of credit. The seller doesn’t care where the money is coming from, as long as it’s liquid cash. Basically, even to look around at a commercial property deal, you’re going to need to have 30%-35% down.
There is nothing scientific or complicated about this. Since I’ve been in real estate, I’ve noticed that buyers/investors used to come in with 90% financing. Today I see at least 51% of the deals are cash. The buyer/investor comes in, shows the seller they have cash, they buy the property, and get through the deal quickly. The usual turnaround is 30-45 days. After buying the property with cash, the buyer/investor (the new property owner) may then go for financing. At this point, it’s easier to get financing because the property is free and clear of a mortgage.
Why is cash important? The seller will be willing to negotiate the price if they know that it is a cash deal and that the closing will be quick because they don’t have to wait for financing to be approved. Many buyers/investors are submitting an offer not subject to a mortgage which is the same as cash and guaranteed to close.
Remember, in real estate today, Cash is King!
Mendy Lipsker
Mendy Realty Inc.
822 Montgomery St
Brooklyn, NY 11213
Phone: 646.662.5454
email: info@mendyrealty.com
website: mendyrealty.com
