Just ask Carl Icahn, who was the only qualified bidder at a landmark auction in February 2010. At an unimaginable level, Mr. Icahn used 150 million in cash to purchase the bankrupt and unfinished Fontainebleau Resort in Las Vegas. A staggering 1.7 billion had already been pumped into the 70% complete resort. It’s not often you can purchase real estate at a 90% discount.
With today’s unpredictable economy, cash is king. Cash provides more flexibility in purchasing, loan qualifications, and mitigates financial risk. If you have a decent amount of cash, you may find yourself in prime position to invest in real estate.
There may never be a period of time in our history with epic level interest rates and reduced home prices. The down side, due to their own greed and subsequent economic Armageddon, is trying to secure a loan from a bank. Many banks and lenders are now mandating 20% down, and that is if you have perfect credit. Any hiccups in your credit history, forget it, unless of course, you have cash.
According to the NAR survey, the median sales price of a vacation home in the U.S. was $150,000 in 2010, down 11% from $169,000 in 2009. Nearly 40% of vacation home buyers paid cash in 2010, up from 29% in 2009. Smart money is leveraging cash.
If you believe the housing market is cyclical and the economy is rebounding, then the best place to stash your cash is in real estate. Traditionally, it’s a better return than current bank account interest rates, less scary than the stock market, provides income potential, and is at rock bottom prices right now. With the added surplus of short sales and foreclosures, cash is your competitive edge over other buyers.
Tip: Save big, leverage cash, and invest in a deflated economy.
