Let's talk about real estate – specifically, let’s talk about how cash deals influence markets.
With interest rates historically low and pent-up demand for housing in play, we’re seeing certain local real estate markets become extremely hot.
When this happens, when demand creates a seller’s market, it's survival of the fittest. Those with the biggest clout in terms of offering potential tend to win the day in terms of completed sales. It's hard for someone carrying a small down payment to the table to compete with someone offering all cash for a property.
With that in mind, many of the top real estate investors have that cash pool that they need to buy the property outright. Alongside this type of streamlining, buyers and sellers are also doing away with many of the traditional bottlenecks in real estate settlement – take the home inspection where everybody waits a couple of weeks to figure out if there are any problems with home systems or appliances. In hot markets, that kind of delay tends to get eliminated. First-time home buyers are often a little put out by these trends, but then, that’s just the way the market can be.
Cash Deals in Accounting
The all-cash real estate deal is a huge advantage on the market, but it also benefits the buyer after the fact.
So much of the complex paperwork that relates to a real estate deal has to do with a conventional mortgage or real estate loan.
First, there is the lending qualification process – the underwriting and everything else. Then there is the amortization, trying to figure out what the borrower owes from month to month for years at a time, and then maintaining that mortgage account, which is a month in, month out endeavor.
Eliminating all of this paperwork is a premium in real estate strategy in general. So that's another way that the cash deal improves real estate settlement. It helps to make your accounting processes clearer and more precise, more clarified and simplified and ultimately, more transparent.
Other Aspects of Real Estate Accounting
At The Real Estate CPA, we help real estate investors to cut through the noise and focus on the real facts hand. Rental properties and investment properties can be practically and easily managed with our transparent real estate tax and accounting systems. Ask us about how to undergird your own real estate strategy and compete in any market, with the power of passive investing and a good personal investment ledger that shows clearly what’s happening at all times.