Purchasing a Woodbury investment property with cash brings with it a lot of benefits. But there are some things you have to think about before paying cash for your next rental property. On one hand, not having a mortgage payment would be great. Your rental income could be very profitable almost instantly. There would be no need to account for mortgage payments. At the same time, however, when you pay cash for a rental property, you still have other expenses to think about. There are other costs related to buying and owning an investment property that you still have to consider. Continue reading to know more about these and what other important things need to be considered when buying a property with cash.
Benefits to Consider
First, let’s see what the advantages are. Aside from the benefit of having no mortgage payment, there are other great things that come with buying a rental property with cash. For example, a lot of sellers would be more willing to negotiate with a cash buyer. And if you can guarantee prompt and full payment, they may even be willing to go for a lower price. With cash buyers, the risk of loan denial would be eliminated. There would be no mortgage approval process that could potentially delay the sale. This means the purchase transaction can move forward quickly and efficiently.
Another advantage of buying a property with cash is that you would be paying a smaller amount in the long run. This is because you wouldn’t have to pay any mortgage interest. Also, you can save some money from not needing to pay for appraisals, title insurance, and lender-imposed closing costs. And cash buyers also get instant and full equity from the first day. That’s because they get ownership of the property right away. This also means that they can borrow against it or cash out when the time is right. Lastly, the thrill of a cash purchase can be enough of a reason for some investors to dive in.
Costs to Consider
Although buying a rental property with cash has multiple benefits, there are also costs that you will need to deal with– even if you don’t plan to finance your purchase with a mortgage. For example, while you may be free from loan-related fees, there will still be closing costs on a cash sale. These costs may need to be paid out-of-pocket. These costs can be as high as 3% of the property’s purchase price. Included in this would be costs like the real estate transfer taxes, processing, and filing fees levied by the County Recorder, a home inspection fee, and so on.
Property taxes will also always be an expense that needs to be paid. All owners will have to pay it, one way or another. There may be property taxes due at the time of the sale, but then there will also be property taxes that are an ongoing expense and must be paid every year or twice a year from then on. In many places, you can access a property’s tax bill online through a city or county website.
Some ongoing expenses that you are expected to pay would be insurance, maintenance and repairs, utilities, and in some cases, homeowner’s association dues. All these expenses come together with owning an investment property. And lastly, the professional Woodbury property management services to maximize ROI. So, be sure to do some research on these and all other costs of owning a property, then include them when you’re estimating your monthly cash flow.
To reap the advantages of buying a rental property with cash, see to it that you have more than just the property’s purchase price on hand. You’ll also need enough cash for closing costs, taxes, insurance, and the repairs you’ll need to make to get the property ready to rent.
At Real Property Management Fidelis, we help rental property buyers find good deals and off-market properties. Whether you want to pay cash or finance your next rental, we can help! Contact us online to learn how.
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