Closing Cost Credits Can Save You Thousands...And Help Your Cash Flow!

Financing investment properties is how most people invest today. While lending guidelines have become more stringent, buyers with good credit, money in the bank, and those that are financially healthy are setting themselves to reap the benefits of tomorrow’s real estate market.

While investing in real estate, locally or out of state, be sure to ask for closing cost credits and other seller concessions the builder is offering, but may not have told you. Most builders are able to credit buyers with some concessions, whether it is a flat amount or some percentage of the total purchase price. Either way, take advantage of what the builder will offer because it could hurt your cash flow and your return on investment. By not asking for these incentives, you may be spending more money out of pocket than you planned on; or more money than you had to really.

One good way to take advantage of seller concessions is to use it for an interest rate buy down. Non-owner occupied interest rates are considerably higher than owner occupied because banks and mortgage companies have been hit hard by the rising foreclosures. Because mortgage rates for non-owner occupied housing have become more expensive (although still quite low compared to historical data), it is beneficial to use the 2% seller concessions on buying down an interest rate.

Deducting the sale price of the home using closing cost credits will minimally help your monthly cash flow and your return on investment. Personally, financing an extra two or four thousand dollars over a 30 year term (or your holding period) will cost you peanuts compared to the gains you will possibly experience.

Your closing cost credits can also be used for blinds in the windows, for a refrigerator, or washer and dryer (if customary for the area), whatever you may need to make the home “rent ready.” Making your home rent ready will help your prospective tenants decide to rent your house among various others because of the added amenities. Best of all, by receiving the additional closing cost credits you may not have to spend extra money out of your pocket to acquire these appliances or fixtures!

Closing cost credits will save you thousands of dollars out of your pocket and help you achieve your goals while real estate investing.


Happy investing!