Is it a good idea to buy a Condo all cash?

Question

I have about $250,000 in the bank and I would like to buy a condo {for not more than $200K} and rent it out.

Do you think its a good idea to buy it all cash or take a small loan for some of it?

Do I have to report the rent money to the IRS?

Answer 1

My suggestion to you would be not to buy it all in cash. I would put a hefty down payment on the condo to the point where the rent out weighs the mortgage on it. That way you still have money left over for when you have a lack of tenants and you are waiting for rents.

The extra money you should put into a stable Mutual Fund, make sure their 10 year history is over at least 10%.

Keeping a large sum of money in a bank account is always a bad idea based off the inflation rate. The past 5 years we have averaged about 4.2% inflation, so keeping money in a savings account or a money market account is not a wise investment choice.

Also, while making payments on the mortgage for your condo. Make the payments twice a month. For example if your payment is 2000 a month. Pay 1000 on the 1st and 1000 or more on the 15th. (IT WILL SAVE YOU A LOT IN INTEREST because it's calculated on a daily basis)

Those are the basics. If you need more info, just let me know

Answer 2

If you are thinking about getting a loan, then you should know about the basics before you get started. If you understand the basic dos and don’ts of loans, then you will be better equipped to find the best loan for your needs. Whatever type of loan you are applying for, you should follow these basic rules to help you find the best deal<!--when searching for a loan, it pays to do your research. Look for as many suitable lenders as you can, so that you can find the very best deal. There are many online pages that allow you to compare loan rates from a variety of lenders. As well as looking online, check out your high street banks and mortgage lenders for deals too. You may find the loan that you need here,

http://best-loans.awardspace.com/

If possible, try and avoid taking out secured loans. If the amount you need to borrow is small or you have good enough credit to borrow without collateral, then do so. Although unsecured loans have higher rates, they are less risky because your home will not be at risk if you cannot make the payments.Try and take a loan out over the shortest period you can afford. Taking-->loans out over 10 years or more can be risky, and you cannot be sure what your financial situation will be at that time.

Answer 3

If you are going to use this condo as an investment than absolutely pay cash.  If you finance it you will be throwing your money out the window in interest.  UNLESS the interest your gaining from the 250K is more than what you would be paying to finance. (not likely)

What kind of interest is your 250K earning now?

Sounds like a good investment to me!

Good Luck!!

Answer 4

With low interest rates it's better to take out a loan. But bewarned, being near a real estate market peak, condo's crash harder than houses, so it makes a poor investment unless you plan to hold for thirty years.

Answer 5

i think u should get a small loan for it b/c 1. u need some money to buy some material for ur condo. 2. u can earn a credit while doing that. 3. it better to have some extra money for emergency etc.

Answer 6

If you wish to purchase a condo be prepared to hold on to it for like 'forever'. It will be very difficult to sell it should you choose to. Condos are a dead fad. Some states require you to live in the place, house, townhouse, condo for a period of time before you can rent it out.

If you want to own property I suggest land as they aren't making dirt anymore. Either way, the housing market isn't going to turn around anytime soon.

As for taking out a loan to purchase, I would advise not to unless your credit is perfect. The bank will only look out for themselves and not you.

Answer 7

If you already have a house/ place of your own. I'd say its a good idea.  As long as you are doing OK financialy... And yes I'm pretty sure you still have to report the money.

Answer 8

Of course you have to report the rental income to the IRS.