There are a lot of benefits in purchasing a Cumming investment property with cash. But there are some important aspects that you need to think through before considering to pay cash for your next rental property. On one hand, not having to pay a mortgage would be so appealing. Your rental income could be very profitable almost instantly. There would be no need to account for mortgage payments. At the same time, however, you don’t get to dodge other expenses just because you paid cash for a rental property. There are other expenses related to the purchase and ownership of an investment property. 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 look at the advantages. Aside from having no marriage payments, there are a number of other wonderful things one can get when they buy a rental property with cash. For example, many sellers would rather negotiate with a cash buyer. They may even accept a lower price, especially if you can guarantee immediate payment in full. With no delays coming from any mortgage approval processes, a cash buyer can transact the purchase faster and also eliminate the risk of loan denial.
Another benefit to consider is having to pay less over the long term. This is because your property wouldn’t accrue any mortgage interests. Also, you get to save money from not having to spend for costs related to the appraisal, title insurance, and lender-imposed closing costs. And, because you will own the property immediately, cash buyers gain full, instant equity in the property. This is equity that you can borrow against or cash out when the time is right. Lastly, the thrill of a cash purchase can be enough to convince some investors to opt-in.
Costs to Consider
Although buying a rental property with cash has its benefits, there are also costs that you will have to deal with, even if you have no plans to finance your purchase with a mortgage. For example, while you may be able to dodge certain loan-related fees, there will still be closing costs on a cash sale. For these costs, you may have to pay it 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 a cost that needs to be dealt with. All property owners will have to pay for this expense. There may be property taxes on the sale– which would usually be due at the time of the transaction. Then there’s the ongoing expense– a property tax that you would have to pay every year or twice a year. In most places, you can view a property’s tax bill online through the city or county website.
Other ongoing expenses that you may have to deal with would be the insurance, maintenance and repairs, utilities, and in some cases, homeowner’s association dues. This would come together with the ownership of your investment property. And finally, professional Cumming property management 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 get the most out of buying a rental property with cash, remember that you’ll need to prepare more 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 North Point, 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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