Is Buying an Investment Property the Right Choice for Your Client?

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April 4, 2019 | By RGR Marketing Blog

Investment Properties as a Way to Diversify Your Client’s Holdings

Cowboy Actor Will Rogers is often given credit for saying, “Invest in real estate. It’s the only thing they’re not making any more of.” The sentiment (even if it was paraphrasing what he actually said) still holds true today, and perhaps even more so as urban renewal, rising real estate prices, and rising rents contribute to the heating up of real estate markets throughout North America.

Right now, buying property as an investment has some real and very obvious appeal. But investing in a second home as a rental or buying land as an investment isn’t necessarily the best choice for every one of your clients who can possibly pull it off.

The Pros and Cons of Buying an Investment Property

There are several pros to investing in property, but there are also a great many down sides. Additionally, advising your client to leverage their equity or to use their savings to diversify their holdings by buying real estate can have negative repercussions on their overall financial situation and credit rating.

Furthermore, as lending practices have still not yet completely unclenched from the fall of 2008, your client may not be able to secure a second mortgage for that investment property, regardless of their desire to become a landlord or land baron. In this post, we’ll take a look at the pros and cons of investing in property and how taking on the additional debt can affect your client’s overall prosperity.

The Pros and Cons of Investing in Property, in Brief

Investing in property can be very compelling for some clients. For those that have the right financial situation and desire to expand and diversify their holdings, it can be a great way to hedge against a downturn in other markets. It can also be a terrific way to earn passive income through rent while building equity toward an eventual payout.

Unfortunately, realizing the potential of an investment in real estate takes considerably more time and energy than some other investments that can give your clients a similar return on their money. Property maintenance, dealing with renters, and the volatility of some real estate markets can seriously compromise the potential return on real estate investing.

How Taking on Additional Property Can Affect Your Client’s Financial Situation and Credit

Further, while investing in real estate means that your client may be able to start cashing rent checks eventually as a return on their investment (and ongoing time and energy), it can also have some challenging effects on their overall financial situation and ability to borrow. In some cases, it can be as simple as advising your client to take their savings and use it as a down payment on a second property, sure.

But, if they are hoping to leverage the equity they’ve accumulated in the home they currently occupy in order to obtain a mortgage for a rental property, you could be facing a challenging situation together when it comes time to shop for that mortgage. Also, taking on additional debt will affect their ability to borrow for other purposes (car loans, etc.) and will ultimately impact their tax liability, as well.

The Final Analysis: Should Your Client Add Another Mortgage to Their Portfolio?

When it comes down to it, buying an investment property will be an excellent strategy for some clients, and a marginal idea (at best) for others. It depends upon your client’s complete financial picture and ability to borrow, their tolerance for risk, and a host of other factors outlined above.

Ultimately, the decision you have to make regarding your recommendations to them on the subject requires a deep understanding of their situation and goals, and the market they are looking to invest in. Moving forward with their best interests in mind should be fairly straightforward once you’ve done the homework.

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Investment Properties as a Way to Diversify Your Client’s Holdings

The Pros and Cons of Buying an Investment Property

The Pros and Cons of Investing in Property, in Brief

How Taking on Additional Property Can Affect Your Client’s Financial Situation and Credit

The Final Analysis: Should Your Client Add Another Mortgage to Their Portfolio?

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money today!

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Investment Properties as a Way to Diversify Your Client’s Holdings

The Pros and Cons of Buying an Investment Property

The Pros and Cons of Investing in Property, in Brief

How Taking on Additional Property Can Affect Your Client’s Financial Situation and Credit

The Final Analysis: Should Your Client Add Another Mortgage to Their Portfolio?

Start making more money today!

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