Should I Buy in Cash or Keep My Money Invested and Finance?

Today someone asked me a question that a lot of new investors secretly wrestle with.

Josh, a 22-year-old from Tampa, reached out and said:

“I’ve got about $250,000 sitting in the S&P 500. My buddy has around $600,000. We’re looking to buy our first rental property near Tampa and fix it up ourselves. Should I cash out my stocks to buy a place outright, or keep my money invested and finance with 20% down? I don’t even need the cash right now—I’m just wondering which move sets me up best for the long run.”

That’s a great question, and it’s one I’ve heard many times in my 20-plus years of investing. Let’s walk through it the way I explained it to Josh—casual, step-by-step, and with a few real stories from my own journey.

1. First, Let’s Look at the Stock Market Side

The S&P 500 has been a reliable wealth builder for decades.

Here’s what keeping $250,000 in the market might look like:

• Compounding Magic:
  
  At an average of 8% annual return, that $250k could grow to about $540k in ten years, around $1.16 million in twenty, and roughly $2.5 million in thirty—without you lifting a finger.

• Liquidity and Flexibility:
  
  If life throws you a curveball, you can sell shares in seconds. No waiting on appraisals, no open houses, no inspections.

• Diversification:
  
  Your risk is spread across hundreds of companies instead of depending on one property in one city.

But the stock market also has its quirks:

• No Leverage:
  
  You can’t control a million-dollar stock portfolio with a small down payment the way you can with real estate.

• Wild Mood Swings:
  
  Stocks can drop 20% in a single year. If you panic-sell, you lock in losses.

So leaving all your money in the market is slow and steady—but not explosive.

2. Now, Let’s Talk Real Estate

Real estate can change the game because you can use leverage.

Here’s what that means:

• Control More With Less:
  
  With $250k, you could put 20% down on five properties worth $250k each. The bank lends you the rest. If those properties rise in value, you benefit from appreciation on the full amount, not just your down payment.

• Monthly Cash Flow:
  
  Tenants pay rent, which (if you buy right) covers your mortgage, taxes, insurance, and leaves you profit.

• Tax Benefits:
  
  Depreciation, mortgage interest deductions, and potential 1031 exchanges can all reduce your tax bill.

But it’s not a free lunch:

• Hands-On Work:
  
  Tenants call when the AC dies at midnight. Toilets clog. Roofs leak. Even with property management, you’re still the boss.

• Market Cycles:
  
  Housing values can dip. If you’re forced to sell in a down market, you might take a hit.

3. Buying in Cash—The Stress-Free Option

Some investors think: “Forget the mortgage, I’ll just pay cash.”

Here’s why that can be appealing:

• Zero Debt, Zero Interest:
  
  No monthly payment means pure cash flow.

• Quick Closings:
  
  Sellers love cash. You can often negotiate a lower price.

• Peace of Mind:
  
  No lender to answer to if the market wobbles.

The downside? You tie up a giant chunk of money that could be working harder elsewhere. That cash isn’t compounding in stocks or multiplying through leverage.

4. The Middle Path: Mix and Match

One idea I often recommend is a hybrid:

• Put 40–50% Down:
  
  Lower mortgage payments, stronger cash flow.

• Keep the Rest in the Market:
  
  Let those dollars keep compounding while you dip a toe into real estate.

This split keeps you diversified and reduces stress.

5. My Take as a 20-Year Investor

Here’s what I told Josh, straight up:

“Since you’re only 22, your superpower is time. The real question is how fast you can rebuild that $250k. If you can stack cash quickly, using leverage in real estate might let you grow faster. If saving that much again will take forever, maybe keep a good chunk invested and start smaller in real estate.”

I also explained one of my favorite strategies: BRRRR—Buy, Rehab, Rent, Refinance, Repeat.

• Buy a property below market value.

• Rehab it to raise the value.

• Rent it to create steady cash flow.

• Refinance after the rehab to pull out tax-free cash.

• Repeat the process on the next property.

That’s how you turn one deal into many without constantly feeding in new capital. The money you pull out after refinancing isn’t income—it’s a loan—so it’s generally tax-free.

6. Let Me Tell You a Quick Story

Back in my early days, I faced a similar choice. I had a chunk of cash sitting safe and sound, and the market was giving me decent returns. But I wanted to scale faster. I bought my first few rentals with leverage and used BRRRR to roll the profits forward.

Fast forward to today: over 3,500 transactions later, I still believe real estate—done smart—is the best way to accelerate wealth. I’ve watched people use one property to build entire portfolios, all while their friends waited on an 8% market return.

7. Key Questions to Ask Yourself

If you’re in Josh’s shoes, ask:

1. How Hands-On Do I Want to Be?
   
   Stocks are passive. Real estate requires effort.

2. How Soon Will I Need the Cash?
   
   Money in stocks is liquid. A house takes time to sell.

3. What’s My Risk Tolerance?
   
   Are you okay with tenant calls and unexpected repairs?

4. Can I Save Again Quickly?
   
   If you can rebuild your cash pile fast, leverage is less scary.

8. Quick Takeaways

• Love passive growth? Stay in the S&P 500 and maybe house hack with a small loan.

• Want to be hands-on and grow faster? Finance a rental and consider BRRRR.

• Can’t decide? Split the difference. Put a bigger down payment and keep part of your money invested.

9. The Bottom Line

At 22, you don’t need to rush. You could easily try both—finance your first rental with 20–40% down, let the rest of your money ride in the market, and see how you like being a landlord. Real estate isn’t just numbers; it’s also about what kind of life you want to build.

Keep it consistent, stay patient, stay true—if I did it, so can you.

This is Jorge Vazquez, CEO of Graystone Investment Group and Coach at Property Profit Academy.

Thanks for tuning in—until the next article, take care and keep building!

If you’d like to connect directly with me, book a time here: https://graystoneig.com/ceo.

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