Many investors consider paying all cash for an investment property, and in today’s market, it may feel like everyone is paying all cash.
To be clear, even when investors use terms like “all cash,” the truth is, no “cash” is actually traded. In most cases, the buyer brings a check (usually certified funds, or wire transfer) to the title company, and the title company writes a check to the seller.
This is the easiest form of financing because there are typically no complications, but for most investors (and probably the vast majority of new investors) all cash is not an option. Let us look at the pro's and con's as our parents taught us on several subjects.
Pros:
1. Faster Closings
2. Waiving contingencies
3. Potential price discount
4. Save on mortgage interest and PMI
Con's:
1. Tying up your money
2. Losing out on better investments
3. It takes longer to save up
All-cash purchases: No mortgage is nice, but there are other expenses you will be responsible for as a homeowner.
1. Property taxes
2. Homeowners insurance
3. Utilities and maintenance
4. HOA fees
Basic wealth generators of rental properties:
1. Cash flow
2. Appreciation
3. Tax savings
4. Loan paydown
Liability:
1. Good Chance of being sue for your assets
2. Disgruntled tenant
Pretend it isn’t an all-cash offer:
1. Don't get Lazy, look for the best deal!
2. Run the numbers as if there was a loan.
3. Use entities wisely
4. Consider financing later
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Paula Higman Real Estate - Park City
Hello, we are Paula Higman Real Estate and we would love to assist you. Whether you are in the research phase at the beginning of your real estate search or you know exactly what you are looking for, you will benefit from having real estate professionals by your side. We would be honored to put our real estate experience to work for you.
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