Making a cash purchase for a Charlotte investment property comes with a whole slew of benefits. But you need to think about some crucial things before deciding to purchase your next rental property with cash. On one hand, it would really be nice to not have any mortgage payments to make. Your rental income would become profitable instantly. You wouldn’t have to factor in the 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. Continue reading to learn more about these and the other things that need to be considered before buying a property with cash.
Benefits to Consider
First, let’s talk about the advantages. More than just having no mortgage payment, buying a rental property with cash brings with it several other benefits. 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 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 advantage of buying a property with cash is that you would be paying a smaller amount in the long run. This is because you wouldn’t have to pay any mortgage interest. 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 cash buyers also get instant and full equity from the first day. That’s because they get ownership of the property right away. This also means that they can borrow against it or cash out when the time is right. Lastly, the thrill of a cash purchase can be enough of a reason for some investors to dive 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 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 much as 3% of the property’s purchase price. These would 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 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 most places, you can go online and search for a property’s tax bill through a 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 finally, professional Charlotte 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 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 Experts, 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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