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

Man Holding Cash and Handing Over KeysThere are a lot of benefits in purchasing a Rohnert Park investment property with cash. But you need to think about some crucial things before deciding to purchase your next rental property with cash. On one hand, it would be very appealing to have no mortgage payments to worry about. Your rental income would immediately be profitable without having to factor in the mortgage payment. At the same time, however, when you buy a rental property using cash, you don’t get to dodge the other expenses that are related to purchasing and owning an investment property. 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 get to know the benefits. More than just having no mortgage payment, buying a rental property with cash brings with it several other benefits. For example, more sellers would be inclined to negotiate with a cash buyer, especially if you can guarantee quick and full payment. They may even accept a lower price for the property. With a cash purchase, there is no mortgage approval process that could delay the sale. The purchase transaction can move forward efficiently since it would eliminate any risk of loan denial.

Another benefit to consider is having to pay a smaller amount over the long term. This is because the property is free from any mortgage interests. Also, you can save money from not having to pay for the fees related to the appraisal, title insurance, and lender-imposed closing costs. And, because you will own the property at day one, cash buyers have full, instant equity in the property. This means you immediately have equity that can be borrowed against or cashed 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 its advantages, there are also costs that you need to think about– even if you aren’t going 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 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 be something owners will have to pay. This will be an expense that will always be there. There may be property taxes on the sale itself– which would be due at the time of the sale. Then there would also be an ongoing expense– a tax that would have to be paid every year or twice a year. In most places, you can view a property’s tax bill online through the city or county website.

A few more ongoing expenses would be insurance, maintenance and repairs, utilities, and in some cases, homeowner’s association dues. You would be expected to pay all these expenses for your investment property. And lastly, professional Rohnert Park 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 be able to enjoy the advantages of buying a rental property with cash, make sure that the cash you have is 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 SonoMarin, 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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