Millionaires Pay Cash
John and Janie have a $1 million nest egg. They're interested in buying a home worth about $300,000. They're having trouble letting go of this money to pay cash for the house.
QUESTION: John and Janie in Houston are in their 60s with no debt, and they have a $1 million nest egg. They're interested in buying a home worth about $300,000. They'll sell their current home, which is paid off. They're having trouble letting go of this money to pay cash for the house. Dave says there's no way he'd go back into debt at this stage in the game.
ANSWER: No, we'd never go into debt--not at this stage of the game. Dude, you made it. Your home is paid for; you've got $1 million in the bank. We're not going into debt. There's not a chance. All of the peace and the sense of security you feel will be rocked even if the rates are low. I'm not going to take you there.
Would I buy a $300,000 home if I had $1 million cash and I was in my 60s and I'd worked all of my life to get there and write a check and pay for it? In about 30 seconds. Absolutely, you need to go buy that house. You need to get a deal on it, though, because you're a cash buyer in a slow market. Let's go shopping. The way I go shopping is I go into vulture formation. I circle looking for something that's dying. I think you ought to buy a $500,000 house and pay $300,000 for it. That's what I'm saying. What cash does is it guarantees a quick and a sure closing.
You guys have sweat and bled for this money. I don't want you to be afraid to--from a pricing standpoint--insult someone because you're holding all the cards. You're in a poker game with a full house when you're sitting there with cash. I often make 10 or 15 offers on properties before I end up buying one. The rest of them think I'm crazy, which is just fine with me--crazy like a fox. Get a house you want. Get something you're proud of and excited to own, but let's get a deal. That's my only point.
You have to keep in mind that this is personal finance. It's not just finance. If you were managing money for a corporation, your statement would be accurate. But you are also managing money so that you and this beautiful wife of yours have a life. This is the reason you do all of this stuff.