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Are You Planning to Buy Your Next Investment Property with Cash?

Man Holding Cash and Handing Over KeysBuying a Spring Valley investment property with cash has quite a lot of benefits. But you have to consider some important things before you decide to pay cash for your next rental property. On one hand, not having to think about mortgage payments would be amazing. Your rental income could instantly become lucrative without the need to account for the mortgage payment. 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. Read on to learn about these and other things you need to consider before deciding to purchase a property with cash.

Benefits to Consider

First, let’s see what the advantages are. On top of having no mortgage payment, there are other benefits to buying a rental property with cash. For example, many sellers would prefer negotiating with a cash buyer– even to the extent of accepting a lower price. Even more so if you can guarantee prompt and full payment. 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 good thing about cash purchases is that you would end up paying a smaller sum for the property. This is because you wouldn’t have to add mortgage interests to the cost. Also, there is some money to be saved when you don’t have to pay for fees related to appraisals, title insurances, and lender-imposed closing costs. And cash buyers also gain full and instant equity in the property because they own it from day one. This means that they can borrow against this equity or cash out when the time is right. Lastly, the thrill of a cash purchase can be reason enough for some investors to opt-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 reach up to 3% of the property’s purchase price. These costs include 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 on the transaction– usually payable at the time of the sale. Then there would be another property tax that would be an ongoing expense– a tax that would be payable every year or twice a year. 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, professional Spring Valley property management to see to it that you get the highest ROI possible. So, be sure to take a look at these and all other costs of owning a property, then include them when you’re creating your monthly cash flow.

To get the best out of purchasing a rental property with cash, don’t forget that you’ll need to prepare an amount greater than just the property’s purchase price. 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 DePenn, 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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