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Understanding Home Ownership- The Beginning

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  1. Module 1: Understanding Mindset
    9 Lessons
    |
    1 Quiz
  2. Module 2: Understanding What you want your money to do for you?
    6 Lessons
    |
    1 Quiz
  3. Module 3: Understanding The Types of Real Estate Investments
    7 Lessons
    |
    1 Quiz
  4. Module 4: Understanding The Resources
    11 Lessons
    |
    1 Quiz
  5. Module 5: Understanding The Finance
    15 Lessons
    |
    1 Quiz
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All Cash

Many investors choose to pay all cash for an investment property.  According to a recent joint study by BiggerPockets and Memphis  Invest, 24% of US investors use 100% of their own cash to finance  their real estate investments. To be clear: even when investors use  terms like “All Cash,” the truth is, no “cash” is actually traded. In  most cases, the buyer brings a check (usually certified funds, such  as a bank cashier’s check) to the title company, and the title  company will write a check to the seller.

Other times, the money is  sent via a wire transfer from the bank. This is the easiest form of  financing, as there are typically no complications, but for most  investors (and probably VAST majority of new investors), all cash is

not an option. Additionally, the return given from an all cash deal will not be the same as when leveraged.  Let’s explore this further via an example:

Real Life Example:

John has $100,000 to invest. He can choose to use that $100,000 to buy a house that will produce $1,000 per  month in income or $12,000 per year. This equates to a 12% return-on-investment.

John could also instead use that $100,000 as a 20% down payment on FIVE similar homes, each listed at

$100,000. With an $80,000 mortgage on each, the cash flow would be approximately $300 each month per

house, which is $1,500 per month each or $18,000 per year. This equates to a 18% return-on-investment –  50% better than buying just one home.