Before deciding how the payment method will be used to buy the property, a number of factors must be taken into account. Firstly, if you have the necessary capital to make a cash investment and / or what implications it would have to acquire through a mortgage loan.
Here we will share the pros and cons of acquiring a cash property to help you make the best decision.
Apart from representing considerable savings, cash payment offers the following benefits such as:
- Avoiding charges of commissions and interest:
Since in a real estate investment, saving is extremely important in order to avoid decapitalizing before receiving profits. Paying a property in cash means that you should not pay commissions and interest to financial institutions.
- Ensuring the current price of the property:
By canceling the total amount of the goods, you can ensure its current price which prevents external variables from increasing it. Also, if the property does not need major renovations you could lease / inhabit it immediately.
- Negotiating better prices:
Sellers tend to pay more attention to those buyers who offer to pay in cash. You can negotiate a better price and take the advantage that the seller will want to get the money faster.
Buying with cash can also have its cons, especially if you are an investor and are not looking to buy a property for your own use.
- It is not convenient for you to decapitalize yourself:
If you only have that amount of money to invest, it is inconvenient to make the cash purchase. As an investor, you know that it takes prudent time to begin to receive the profits of a real estate investment. Especialy if you are looking to increase capital and, moreover, if what you are looking for is a monthly cash flow.
- You stop your investment capacity:
You will be missing opportunities for other investments that are the same or more competitive whilst waiting to recieve profits.
- There is no tax deduction:
When you buy a property in cash you will not have the advantage of tax relief; that is the tax exempted. Therefore, you must add the corresponding taxes to the final price of the house
Translated from ‘Pros y contras de comprar al contado‘