Is cash king?
Iwill never forget the first deal Ashley and I had ever done that was severely damaged by fire.
The year was 2011, and the deal, which we call the burnout, was a 1992 single wide located in a mobile community in Dalton.
That house was the third deal Ashley and I had ever done. A burnout on our third deal sounds pretty gutsy huh? Well, there’s a fine line between gutsy and stupid, and I’m not sure where we fell in that spectrum.
I take that back. At the beginning it seemed like a great idea. You see, we had purchased the burnout, along with another single wide, as a package deal. The other home, which we refer to as the retro trailer, was an 80s model with interior finishes that put us in mind of a houseboat. But it was in good shape, and by purchasing it and the burnout, we were basically getting a buy-oneget-one-free deal.
Our exit strategy was to do a deal structure called a Lonnie Deal, which is where you buy a trailer in a mobile home community for cash and then sell it with owner financing.
Back then, our typical Lonnie deal was to buy a home for $3,000 cash. We would list it for sale as-is with owner financing available. We would find a buyer who would give us a $1,000 down payment and then make us monthly payments of $300 a month for 42 months.
With those numbers, we would get our entire investment back within seven months, and the remaining payments were pure profit. And we could do all this without doing any rehab on the homes.
We bought both the burnout and the retro trailer for $3,250. But the burnout wasn’t a typical deal. We knew we were going to have to do a full rehab on it. Because of that fact, I repaired a busted water pipe on the retro trailer, and I got it on market ASAP to get some cash coming in while we worked on the burnout.
But something unexpected happened. A buyer offered us $3,000 cash for the retro trailer.
Thinking we could recoup most of our money instantly, and seeing as how a bird in the hand is worth two in the bush, I accepted that deal and sold it a week and a half after we purchased it. Cash is king after all.
But I messed up. You see that same buyer offered us an additional $3,000 to buy the burnout, too. Had I done that, I would have nearly doubled my money in less than two weeks — money we could have used to go buy two more Lonnie Deals in better shape and not have to do any rehab … but I didn’t do that.
You see, I had already decided the $300 a month coming in off the burnout was going to pay a car payment for us. And that was all I could see. So instead of taking a bird in the hand, I watched the one in the bush fly off and Ashley and I didn’t get to eat any chicken because of the money we lost on that deal.
I should have taken the cash.
I said before, cash is king, but is that true today?
We had a deal recently were we got an all-cash offer, and we declined it. It was on a flip we had put on market for $225,000. We had a contract fall through due to financing, and the cash offer came in right as we went to put it back on market.
The buyer lowballed us, thinking cash was king, I assume, and that we would be motivated to take a low offer with a quick close since our previous contract had fallen through. But here’s the thing. We had a beautifully remodeled house in a great area in a time where there was next to nothing on the market. Overnight, we had multiple over listprice offers once we relisted it. And by waiting an extra 30 days to close, we were able to make an additional $45,000 over the all-cash offer.
So, is cash king? Not always — especially in today’s retail market. Right now, the hot commodity is beautifully remodeled homes and not a quick cash closing.