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

Man Holding Cash and Handing Over KeysBuying a Pompano investment property with cash has quite a lot of benefits. 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 think about mortgage payments would be amazing. Your rental income would become profitable instantly. You wouldn’t have to factor in the mortgage payments. At the same time, however, just because you purchased a rental property for cash, it doesn’t mean you can escape having to pay the other expenses related to buying and owning 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 look at the advantages. Beyond having no mortgage payment, there are other good things that come from buying a rental property with cash. For instance, sellers prefer negotiating with a cash buyer. They may even accept a lower price if you can guarantee immediate and full payment. 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 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, there is some money to be saved when you don’t have to pay for fees related to appraisals, title insurances, and lender-imposed closing costs. And cash buyers also gain full and instant equity in the property because they own it from day one. This means that they can borrow against this equity 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 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 be something owners will have to deal with. This will be an expense that will never go away. 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 go online and look at a property’s tax bill 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 Pompano property management to maximize ROI. So, do look into these and other costs of owning a property, and then make sure they’re included in your monthly cash flow estimates.

To get the best out of purchasing a rental property with cash, don’t forget that you’ll need to prepare an amount greater 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 United, 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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