Cash purchase at 187k versus hard money at the same price, and I can not figure out which one actually costs more over a 90-day flip
I have 187k sitting in a money market at 4.9 percent, so the opportunity cost over 90 days is roughly 2,300. Hard money on the same deal is 12 percent annualised plus two points, which comes out to around 5,650 over the same period. On paper cash wins by 3,300. But the cash version ties up the whole 187k, and I only have one of those sitting around. The hard money version leaves me liquid enough to go after a second deal if one shows up, and in the market I am looking at right now, Brockton and parts of Quincy south of the centre, there are two or three reasonable cosmetic candidates that come up every month. So the 3,300 I save by paying cash might be worth less than the optionality I give up. I keep running this and I can not find a clean answer because it depends entirely on whether a second deal actually materialises inside those 90 days, which I have no way to know in advance. The flip itself is a straightforward cosmetic scope, kitchen and two baths, maybe 28k in work, ARV around 265k. The deal works either way. I just want to know if there is a cleaner framework for thinking about the cash versus borrowing decision when the opportunity cost is real money but hard money is also real money.
