Most investors aim to be able to buy houses outright with cash either to do up and sell on, or to rent out and remortgage later.
Cash buyer status is considered by many to be property investor nirvana and gives you multiple advantages over people who are mortgage-dependent.
Speed: purchase of a property can be completed in a matter of days. If that is important to a vendor, this will blow away buyers who need to set up a mortgage.
Bigger Profits: being a cash buyer means you can usually get a deal. My Dad would always ask ‘how much for cash?’ when he was buying things. It’s a universal concept that transcends just buying property; if you pay cash you get a discount. In property it’s probably more applicable than most other purchases, your cash buyer status will allow you to drive down the price.
Borrowing costs: zero obviously and that boosts bottom line profit.
Agent credibility: agents love an investor who can 'walk the talk'. When agents see you are the real deal and you complete quickly, you’ll be at the top of the list in their little black book when a juicy deal comes along. You be seen as someone who can increase their month-end commission or ensure their completion targets are hit. You’ll get even more brownie points if you intend to sell on some properties and give them back to the agent you bought from to sell again.
Unmortgageable properties: when the condition of a property makes it unmortgageable it automatically rules out any mortgage-dependent competing buyer. There lots of variables of unmortgageable property and we cover 16 of these in the Ninja Investor Programme. Unmortgageable properties tend to make bigger profits for two reasons:
Even the disadvantage of tying up your cash is not really a disadvantage. You can apply for the full range of BTL mortgages once you have owned the property for 6 months. Your cash is not really tied up for that long. If all of your cash is sitting in properties at any point and a real corker of a deal comes up that is too good to let slip by, you can still put any of your unencumbered properties up as security and buy that corker using bridging finance. You will incur some borrowing costs, but if the deal is good enough you would still make a good profit.
You may be thinking ‘that’s all very well, but I don’t have a big nest egg to allow me buy properties outright’. However, clever investors know that nearly all these advantages are available to them if they know how to use bridging – and which types of bridging will allow them to buy almost in the same way.
The only advantage you’ll lose will be the zero lending costs – as bridging finance does have a cost, but if you know how to resource the right bridging lenders (or you have a very good and experienced broker) you can increase the profits you are able to make way beyond the cost of lending.
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