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

Man Holding Cash and Handing Over KeysMaking a cash purchase for an Osprey investment property comes with a whole slew of benefits. But there are some crucial things you have to evaluate before making the decision to pay cash for your next rental property. On one hand, it would really be nice to not have any mortgage payments to make. Your rental income would be so lucrative right away. You’d see the profits without having to factor in mortgage payments. At the same time, however, when you purchase a rental property for cash, you don’t magically wave away all other expenses. You still need to pay the other costs related to buying and owning an investment property. Read on and learn about these and other important things to think about when buying a property with cash.

Benefits to Consider

First, let’s take a look at the benefits. 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 mortgage approval process to go through and potentially delay the sale, a cash buyer can move forward with the purchase quickly and 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 fees 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 itself could be the reason why some investors decide 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 don’t have to pay certain loan-related fees, there will still be closing costs on cash sales. You will need to pay this out-of-pocket. These costs can go as high as around 3% of the property’s purchase price. These would include expenses like 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 owners will have to pay. This will never go away. There may be property taxes on the purchase transaction– which would normally be due at the time of the sale. Then there would be another property tax that would be an ongoing expense– one that should be paid every year or twice a year. In many places, you can take a look at a property’s tax bill online through a city or county website.

A few more ongoing expenses that you can expect to pay would include insurance premiums, repairs and maintenance costs, utilities, and in some cases, homeowner’s association dues. All these costs are related to your investment property. And finally, professional Osprey property management to make sure you get the best ROI. So, be sure to look into these and all other costs related to owning a property, and then make sure to include them when doing your monthly cash flow projections.

To be able to get the benefits of buying a rental property with cash, make sure that you’ve prepared 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 Sarasota & Manatee, 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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