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

Man Holding Cash and Handing Over KeysPurchasing a Warrenville 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, 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, 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. 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 the benefit of having no mortgage payment, there are other great things that come with buying a rental property with cash. 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 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 a smaller amount over the long term. This is because the property is free from 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 is reason enough for some investors to jump 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 avoid the loan-related fees, you will still need to pay, out-of-pocket, the closing costs on a cash sale. 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 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 many places, you can take a look at a property’s tax bill online through a 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, you’ll need professional Warrenville property management to maximize ROI. So, be sure to look into these and all other costs of owning a property, then include them when you’re making your monthly cash flow projections.

To reap the advantages of buying a rental property with cash, see to it that you have more than just the property’s purchase price on hand. 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 Chicago Group, 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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