If you have the resources to purchase a property without financing, you can reap the benefits in both the short- and long-term. Let’s take a look at the advantages and see why cash really is king.
It’s Yours. It’s just a good feeling to own a property outright; but positive emotion aside, you will also be able to sell the property virtually immediately and see most, all, or more than your original investment come back to you.
Another benefit is that you will be able to leverage this asset with a cash-out refinance. You’d have a mortgage then, but you’d also have up to 75% of the value in cash to reinvest, save, or use for upgrades.
No Interest. Interest racks up over the course of a 30 year mortgage; you end up paying about three-quarters of the original price. So, if you purchased a property for $200,000, you’re looking at $150,000 in interest on top of the principal. Even if you sell after, say, 10 years, you will still owe about 80% of the principal. Remember, your first payments are essentially going towards interest.
First Pick. If you are interested in turnkey real estate investments, there’s a big benefit of going with cash. Many providers, including USREEB, offer properties to cash buyers first. It streamlines the process (e.g. no appraisal required), and you can even buy the property before rehab is complete.
Mitigated Risk. You don’t have to worry about foreclosure, for one! If you go through a slump, you can weather it without that particular threat, or the risk of damage to your personal credit.
Along the same vein, vacancies will also be far less onerous. Because you have no mortgage payment, you have a lot of built in breathing room when units are unoccupied. You can also take more time to find the right tenant(s), which further reduces your risk as a property owner.
Appreciation Is All Yours. If your property appreciates in value, you are the winner. With a mortgage, you’d still owe a substantial chunk of interest that would eat away at appreciation. With cash, it’s yours.
If you have cash resources, investing in real estate can be an excellent way to maximize its power. Ready to get started?