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

Man Holding Cash and Handing Over KeysPurchasing a Manchester investment property with cash brings with it a lot of benefits. But there are some things you have to think about before paying cash for your next rental property. On one hand, not having a mortgage payment would be great. Your rental income would immediately be profitable without having to factor in the mortgage payment. 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 learn more about these and other important things to consider before you buy a property with cash.

Benefits to Consider

First, let’s see what the advantages are. Beyond having no mortgage payment, there are other good things that come from buying a rental property with cash. For example, a lot of sellers would be more willing to negotiate with a cash buyer. And if you can guarantee prompt and full payment, they may even be willing to go for a lower price. 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 advantage to think about is having to pay less for the property over the long term. This is because you wouldn’t have to include 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 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 itself could be the reason why some investors decide to opt-in.

Costs to Consider

Although buying a rental property with cash has a lot going for it, there are also costs that you will have to consider– even if you plan to forgo financing your purchase with a mortgage. For example, while you may no longer have to pay any loan-related fees, there will still be closing costs for cash sales. For these, you may have to pay them out-of-pocket. These costs can amount to around 3% of the property’s purchase price. These 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 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 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 most places, you can view a property’s tax bill online through the city or county website.

Some more ongoing expenses that you have to pay would be the insurance, maintenance and repairs, utilities, and in some cases, homeowner’s association dues. All this comes together with owning your investment property. And finally, professional Manchester property management to maximize ROI. 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 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 Absolute, 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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