when buying a property cash ???

Question

Hello BP,

I am new to investing and practicing on running numbers daily. I have a question when buying a property cash are you required to pay the full taxes and insurance for the next year as part of your closing cost ? i ask because i own my primary residence (bank financed) and when i bought it i was required to pay taxes and insurance in advance at closing and put them in escrow. just want to make sure i am running my number correctly for acquisition.

Zach Lemaster · Answer

@Ricardo A Perez

If you are not having a lender escrow the taxes & insurance, you should be able to pay them year by year except for the proration at closing on the HUD.  Just curious, why are you not considering financing?  Rates are all time lows right now, and an excellent time to secure great rates on long term financing.

Ricardo A Perez · Answer

@zach lemaster that’s the plan ! Stay in touch Zach.

Zach Lemaster · Answer

@Ricardo A Perez

Got it!  Yes, once you have a more established track record you should be able to qualify more easily with private lender for acquisition!

Ricardo A Perez · Answer

@Zach Lemaster good question well my primary strategy is the BRRRR so long term bank financing will come at the back end. The question was asked more for the acquisition side.Since i am not a seasoned investor i will begin with my own funds and once i get a solid track records i want to use leverage and use private lenders to finance the acquisition and rehab but as i gain experience i would be open to other forms of financing strategy's.

Account Closed · Answer

@Ricardo A Perez the seller usually has to make sure taxes are current for previous year(s), then you’ll be required to pay what’s due whenever your county/city requires them.  I bought a few flip houses out of state and for some reason thought the county taxes was all I had to pay on the small town.  Found myself almost losing the thing when the city finally found a way to tell me I owed them $45 for the last 3 years or my house was getting sold in June!  It’s just good to call the city and county and ask them what’s up with your property and when things are due and keep note of it.  You might also look for a reassessment if you think they are too high before you get the ball rolling paying the taxes.

Aaron K. · Answer

@Ricardo A Perez no but paying insurance all at once usually gets you a discount, so it may be good practice to do anyways, most counties have property tax payments of 1/2 at two points in the year but that has just been my experience it may be different elsewhere.

Pat L. · Answer

Ins is a given but they probably wanted the escrow account funded to cover the upcoming Taxes that your monthly escrow pmt may not fully cover by the time they're due. Just remember you're also paying interest on that advance funding.

Ricardo A Perez · Answer

@Aaron K. thank you so much for sharing what you experience. it would make sense to pay your insurance premium in full if it saves you money.

when buying a property cash ???

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