While an opportunity for an investment property may arise where cash is king because of unique circumstances, there are other times you may need to dethrone your cash because it’s not in your best interest to use it as your payment method.
You may wait a long time if you’re waiting until you’ve saved enough cash to buy a property. Additionally, if a rare opportunity should come along, your cash-only philosophy may cause you to miss out on a highly profitable investment.
Read on as we explore the pros and cons of paying cash for your Birmingham investment property.
When you pay cash for your Birmingham investment property, you have the power to move swiftly and close on bargains mere days after they hit the market. As the trend for home sales is exceptionally fast-paced, many properties are selling the day they are listed, cash buyers often make the first offer, which can sometimes make all the difference in getting a great deal.
Paying cash for your Birmingham investment property creates instant equity.
Increased Cash Flow
When you use cash for your Birmingham investment property, most of the monthly rent payment will be income because there will be no mortgage payment to make. Therefore, your only expenses will be any maintenance and other costs of the investment property that you incur as a part of your investment business.
One more benefit of paying cash for your Birmingham investment property is the savings you will realize by not paying interest on a loan.
Higher Priority with Sellers
An advantage of using cash for your Birmingham investment property is the priority of cash offers. So often, sellers must jump through numerous hoops to assist their buyers in qualifying for their funding with the lender; avoiding this red tape is an attractive aspect of cash offers to sellers.
Less Cash on Hand
Your available capital is limited when you use your cash on hand to buy Birmingham investment property. Then, because there’s no mortgage, the property must sell to regain the money you’ve invested or wait until you gain equity for ready cash to explore other investment properties to grow your portfolio.
Paying cash for your Birmingham investment property means you will have less overall leverage for any other deals. However, using other people’s money to purchase your investment property while the property increases value over time allows you to grow your portfolio faster. In addition, your investments generate more current cash flow when you borrow funds for a portion of your investment properties than an investor limited by using only their available capital for funding.
When you pay cash for your Birmingham investment property, you must weigh the risk of changes from forces outside your control that could put you in a financial bind: unexpected significant expenses or loss of income may cause damage to your credit or worse.
Should you face a lawsuit after having paid cash for your Birmingham investment property, those investigating public records will see there is no debt, with no bank lien on the property, a disgruntled tenant could target you for a lawsuit.
Home Buyers of Alabama will answer any questions about whether paying cash for your Birmingham investment property is right for you! If you want to explore how you can secure funding, the pros at Home Buyers of Alabama can help you locate many resources that suit your current financial position. At Home Buyers of Alabama, our professional investors have years of experience and can help you determine the best solution to buy your next investment property with no obligation. Contact Home Buyers of Alabama at (205) 379-8185.