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Cash advance versus line of credit

Understanding your future investment returns without a solid pro forma model is nearly impossible. Today were looking deeper into a couple of common investment scenarios to test whether youll make a better IRR (Internal Rate of Return) by buying a property all-cash, or levering up at 50.

Stabilized Office. The first example investment is a stabilized office building being acquired at a 6 cap rate for 10,000,000. Assuming its a safe, conservative investment and you expect to sell in 10 years for 12,000,000, should you buy cash or lever at 50.

Youre looking at turning your 7 return into a 9 return for this investment with the given loan terms, which are reasonable ones in todays market. Leverage wins here. Value-add Multifamily. So that seems all well and good for stabilized assets, but what about heavy value-add. Should you pony up all cash if you can for a five year substantial cash advance versus line of credit play.

Cash advance versus line of credit

Unlike a cash withdrawal from a bank account, a cash advance has to be paid back - just like anything else you put on your credit cash advance versus line of credit. Think of it as using your credit card to buy cash rather than goods or services. Its convenient, but its quite expensive. How (and why) do you get a cash advance. If you carry only credit cards for day-to-day spending, you could find yourself in a pinch when confronted with a cash-only situation, such as buying lunch from a street vendor, veggies at a farmers market or a sandwich at a mom-and-pop deli.

In that case, a cash advance might be tempting. Some people also turn to credit card cash advances when they need paper money but dont have enough in their bank account. If your credit card has a PIN, you can get cash advances directly from an ATM. Otherwise, you can take your card to a bank that offers advances through your cards payment network, such as Mastercard or Visa.

Youll have to show ID.

Cash advance versus line of credit