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Benefits of paying cash for a home?
Topic Started: 2 Aug 2014, 05:34 PM (3,705 Views)
Poontang
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stinkbug
2 Aug 2014, 07:57 PM
I'd be more inclined to invest your $750k elsewhere (perhaps a range of high yielding blue chip shares), and use the tax-advantaged dividends to pay off a loan for the house. That way you aren't the one paying for the home and you're not losing your $750k. In the event something goes wrong you can sell some shares, and are presumably also working.

Over time the shares dividends will easily exceed the cost of paying down the home loan and you can pay it down more quickly. At the end you'll have the shares (which will have grown), the dividend cash flow (which will have grown), the house (which should have increased in value), and it won't have cost you in terms of working income.

Just an alternate view, this approach won't be for everyone.
Depending on personal income and tax bracket, $50k to $65k would be reasonable income expectation from that amount.
There are some people who seem angry and continuously look for conflict.
Walk away, the battle they are fighting isn't with you, it's with themselves.

The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it.
The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.

Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
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newjez
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stinkbug
2 Aug 2014, 07:57 PM
I'd be more inclined to invest your $750k elsewhere (perhaps a range of high yielding blue chip shares), and use the tax-advantaged dividends to pay off a loan for the house. That way you aren't the one paying for the home and you're not losing your $750k. In the event something goes wrong you can sell some shares, and are presumably also working.

Over time the shares dividends will easily exceed the cost of paying down the home loan and you can pay it down more quickly. At the end you'll have the shares (which will have grown), the dividend cash flow (which will have grown), the house (which should have increased in value), and it won't have cost you in terms of working income.

Just an alternate view, this approach won't be for everyone.
?? You can always mortgage it after you've bought it.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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nofriends
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stinkbug
2 Aug 2014, 07:57 PM
I'd be more inclined to invest your $750k elsewhere (perhaps a range of high yielding blue chip shares), and use the tax-advantaged dividends to pay off a loan for the house. That way you aren't the one paying for the home and you're not losing your $750k. In the event something goes wrong you can sell some shares, and are presumably also working.

Over time the shares dividends will easily exceed the cost of paying down the home loan and you can pay it down more quickly. At the end you'll have the shares (which will have grown), the dividend cash flow (which will have grown), the house (which should have increased in value), and it won't have cost you in terms of working income.

Just an alternate view, this approach won't be for everyone.
I am forced to be buying a house because of the situation or otherwise I would be using this 750k in another way as you have suggested.
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zaph
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newjez
3 Aug 2014, 09:46 AM
?? You can always mortgage it after you've bought it.
If you look at the scenario of investing in equities that Stinkbug has suggested it would be much better to pay cash for the house (assuming long term PPOR) and borrow against the house to buy those shares. No margin calls.
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nofriends
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peter fraser
2 Aug 2014, 06:57 PM
An interesting question.

My initial thought was that yes if you are an experienced buyer you can use the 'I'm a cash buyer" line to drive a better deal, but the downside is that if you are not an experienced buyer and you buy emotionally you just might get fleeced.

At least when you get a loan the bank do a valuation and often it's possible to either get a copy of the valuation or at least you could find out the amount.

I'm not suggesting that you borrow if you don't have to, but if you have any doubts then perhaps getting a valuer to do a valuation might be a good idea. You may still be happy to pay above the valuation, valuers are conservative but at least you won't be ripped off for $100K or so without being aware of it.

Best of luck whatever you choose to do.
Yep I am not an experienced buyer as I am only young and being forced to act on someone else's behalf.

I am not someone who will act emotionally though and have done my research on the property and know what I would pay for it. I am conservative in this respect as if I don't think it's a good deal, i will walk away easily because I am not in any rush and there is always another home out there to buy and definitely a better time than there is now.
Chris
2 Aug 2014, 10:07 PM
Anyone who has accumulated $750k in cash shouldn't require advice from a random forum. How do you amasse such wealth and have NFI??
I am acting on someone's behalf Chris. The only thing i have no idea about is the actual process of buying a house because I haven't done it before.

I do take an interest in economics and macroeconomics so I do have a good idea about money and business but I am only young and haven't been through the experience of buying a house and it's intricacies.
found more on this here:

http://forums.whirlpool.net.au/archive/2161915
Edited by nofriends, 3 Aug 2014, 12:49 PM.
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Foxy
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Zero is coming...

nofriends
2 Aug 2014, 05:34 PM
Hello APF,

I have about 750k in cash to buy a home for my family member.

Does paying for a house in cash have benefits?

Do we get the house sooner?
Are they more likely to sell to us?

I know there is no difference from them getting 750k from the bank and 750k from us in cash but i thought I would ask.

etc?

Thanks!
Man if you have $750,000 we should be asking you things.
I bow to the cash man.
Peter

:tu:

Just keep it real.
And good luck.

If you are in Perth message me and i am only to happy to help.
Also you must find an old person in your family who is wise with money.
There are many predators out there man.
Only ask people that have managed money for a long time and are "Rich"
Not the fool in a suit with no track record.
Money talks bullshit walks.
Buy the property not the story.
Edited by Foxy, 3 Aug 2014, 01:41 PM.
http://www.afr.com/content/dam/images/g/n/2/1/u/8/image.imgtype.afrArticleInline.620x0.png/1456285515560.png
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Blondie girl
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All the best "no friends"

You seem like a no nonsense type of person, emotions stuff things up & never rush & be impatient.. Some here have already given you some plausible advice.

Never ever tell the RE agent your financial situation..it can be used against you...
Newjerk? can you try harder than dig up another person's blog. My first promo was with Billabong and my name in English is modified with a T, am Perth born but also lived in Sydney to make my $$
It's Absolutely Fabulous if it includes brilliant locations, & high calibre tenants..what more does one want? Understand the power of the two "P"" or be financially challenged
Even better when there is family who are property mad and one is born in some entitlements.....Understand that beautiful women are the exhibitionists we crave attention, whilst hot blooded men are the voyeurs ... A stunning woman can command and takes pleasure in being noticed. Seems not too many understand what it means to hold and own props and get threatened by those who do.
Banks are considered to be law abiding and & rather boring places yeah not true . A bank balance sheet will show capital is dwarfed by their liabilities this means when a portions of loans is falling its problems for the bank.
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stinkbug
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zaph
3 Aug 2014, 11:56 AM
If you look at the scenario of investing in equities that Stinkbug has suggested it would be much better to pay cash for the house (assuming long term PPOR) and borrow against the house to buy those shares. No margin calls.
Pay cash for the equities and borrow to buy the house and there are no margin calls anyway, plus the interest rate is lower. Buy the right equities and you'll not really need more than a 5% deposit as the dividends will pay the whole loan, for the life of the loan.
nofriends
3 Aug 2014, 11:50 AM
I am forced to be buying a house because of the situation or otherwise I would be using this 750k in another way as you have suggested.
No worries. I hope it works out well for you.
Edited by stinkbug, 3 Aug 2014, 10:40 PM.
---------------------------------------------------------------

While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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silverman47
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Jimbo
2 Aug 2014, 07:47 PM
Don't tell the real estate agent how much you have. They will make sure you part with every penny of it.
thats total BS.

20 grand, even 50 grand to a real estate agent on a 750k property is worth nothing to them. They want to sell the property, and pumping up the price does them no favours. If anything they are more likely to discount the property to the potential buyer than mark it up.
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peter fraser
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nofriends
3 Aug 2014, 11:57 AM
I am not someone who will act emotionally though and have done my research on the property and know what I would pay for it. I am conservative in this respect as if I don't think it's a good deal, i will walk away easily because I am not in any rush and there is always another home out there to buy and definitely a better time than there is now.
Good, because learning to walk away from a deal that is not going your way is one of the most basic but rarely understood negotiating rules that everyone should follow. It's just amazing the number of people who will be still trying to stitch a deal together where no worthwhile deal exists. If you can just learn that one rule you will always be ahead of the pack.
Any expressed market opinion is my own and is not to be taken as financial advice
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