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A cash buyer is someone looking to buy a property they can afford outright without needing a mortgage from a bank or selling another property. Over the last year, the number of cash buyers in the UK property market has increased, representing 46% of total property transactions.
Buy-to-let cash investors are now looking at the opportunity to avoid rising interest rates by cash buying. This is because cash investors will not need to rely on a mortgage lender to fund the deal. Is now the right time to invest as a cash buyer? And what are the disadvantages?
When buying with a mortgage, the process is much more stringent and mortgage approvals can take several weeks. However, when buying with cash the deal can usually be completed within a few weeks, rather than months. This is because usually when dealing with cash there is immediate proof of funds and there is no chain stalling the transaction. For instance, sellers do not have to wait for the buyer to sell the property to release funds.
Typically, the reason a property deal will fall through is due to a change of personal circumstances. This can affect mortgage repayments or jeopardise the mortgage agreement entirely, causing the bank to back out of the agreement. Cash buyers would not need to rely on a mortgage agreement to fund the deal.
Loss of Liquidity
A property purchase often requires a large cash investment. Therefore, reducing the overall liquid assets of a buyer. When investing it is crucial for buyers to understand how they will be able to manage without immediate access to the funds if personal circumstances change.
However, if a buyer has carried out research on the area, the asset should generate healthy returns. This is particularly the case if the property is located within or close to a regeneration zone.
Lower Prices Not Guaranteed
Often sellers are happy to accept a lower offer on the property, in exchange for a quicker deal. However, others are willing to wait for a higher offer, to maximise the returns from their asset. Usually, this is the case when dealing with another investor because they may want to increase their capital.
To get a better deal, cash investors are favouring new build properties to add to their portfolio. This is because they can buy off-plan meaning they can buy a property below market value before it is built.
Cash buyers investing in a town or city that is seeing growth in the market, are going to make significant returns on their investment. A diverse investment portfolio, such as cryptocurrency, stocks, and shares, can give a boost in the short term. But the property has always been the safest and most secure asset when investing.
Across the north, properties tend to appreciate in value much more quickly than in the south. Therefore, investors are more likely to make higher returns on investment in the North. If you are still questioning whether a property is a good investment, click here to find out.
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