Benefits to Consider
First, the advantages. Besides having no mortgage payment, there are many different good benefits to buying a rental property with cash. By way of example, sellers may be more open-minded to negotiate with a cash buyer, even accepting a lower price if you can guarantee immediate payment in full. With no mortgage approval process possibly delaying the sale, a cash buyer can move through the purchase more effectively and eliminate the risk of loan denial.
Another benefit to think about is paying less over the long term for the property because you won’t have any mortgage interest to be afraid of. You may be able to save some money on fees related to the appraisal, title insurance, and lender-imposed closing costs. And, because you will own the property outright from day one, cash buyers gain full, instant equity in the property that can be borrowed against or cashed out at the appropriate time. The thrill of a cash purchase is an adequate cause for a lot of investors to opt-in.
Costs to Consider
Even though obtaining a rental property with cash has many advantages, there are also costs you will still be responsible for, although you plan not to finance your purchase with a mortgage. As an example, while you may avoid certain loan-related fees, there will still be closing costs on a cash sale that you will be required to pay out-of-pocket. These costs can add up to as much as 3% of the property’s purchase price and include things like real estate transfer taxes, processing, and filing fees levied by the County Recorder, a home inspection fee, and so on.
Property taxes will likewise repeatedly be a cost that owners will need to pay, one way or another. There could be property taxes due at the time of the sale, and then there can be ongoing expenses that will have to be paid every year or twice a year thereafter. In a lot of places, you can check a property’s tax bill online through a city or county website.
Several other ongoing expenses that you can assume to pay related to your investment property include insurance, maintenance and repairs, utilities, and in some cases, homeowner’s association dues. Not to mention professional Ojai property management to maximize ROI. These and all other charges of owning a property should be seriously researched and included when estimating your monthly cash flow.
To reap the benefits of buying a rental property with cash, take into consideration that you’ll need more than just the property’s purchase price on hand. You’ll moreover 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 Limitless, we aid rental property buyers to find the right deals and off-market properties. Whether you wish to pay cash or finance your next rental, we can help! Contact us online to learn how.