Advantages of buying a property with cash
1. No debt or interest payments
Purchasing a property with cash means that you don’t have to worry about taking out a loan and making monthly interest payments. In recent times interest rates have risen significantly and therefore the cost of finance has risen accordingly. Cash buyers do not have to worry about this.
2. Good negotiating tool
Having access to large amounts of cash can be used as leverage when negotiating with buyers, potentially allowing you to get a better deal on the purchase price.
3. Quicker conveyancing process
Buying a property with cash will also mean that the process is much quicker, allowing you to move into the property sooner and start renting it out faster.
4. Lower purchase costs
When purchasing a property without taking out a loan, you can save money on the upfront costs associated with mortgages, such as application fees and of course interest on the loan.
5. Equity
Investors who own a rental property outright have 100% of the home’s value in equity. As mortgage payments are not required,
Disadvantages of buying a property with cash
1. Lack of liquidity
Putting all your money into one property can also limit your ability to access cash quickly. If you need a large amount of money in the future, your only option may be to sell your home or take out a new mortgage, which can take some time.
2. Limiting your options
Investing all of your cash in a property purchase may limit your ability to invest in other opportunities and reduce risk through diversification.
3. Anti-money laundering
An anti-money laundering (AML) check is to be expected when such large amounts of cash are being handled. Proof of identity and funds, as well as providing documentation showing the source of funds, will be needed to pass AML checks.