Taking a little extra time with your client and or prospect to teach them why real estate is still the best investment tool in existance, after all they are not making any more of it.
The basics that I think every client should know before going out to look at real estate.
1. Inflation of investment! When buying a residential rental an investor is tying up a for example $200,000.00 house for 10% down, or $20,000. If that house inflates at only 5% per year ($10,000) that on its own would bring the investor 50% per year increase on their initial investment.
2. Income! The rental income is another leg of the investment. Most houses now a days are around a 5% return. As houses get more expensive the rental return seems to drop, but at 5% the investor will have to feed the investment monthly or put more money down to make it cash flow. I feel it is better for the investor to put as little down as possible and buy more houses to make more of the inflation shown above. Investors need to be comfortable with their forced savings plan of feeding their rental.
3. Tax Benefits! Uncle Sam gives great benefits for property owners. Depreciation of improvements can be a huge help at tax time, as well as writing off all expenses including vehicle. Interest on financing as well as even property taxes can be used to an investor's benefit to put $$ in their pocket.
4. Own your own home 1st! Before starting to purchase rentals a persons first purchase should be a personal residence. There are better loans and since we all have to live somewhere your client should be your best tenant.
5. This is a long term plan! This is the best long term plan for financial independance going. Do not try to make instant profits as that can be a frustrating experience, but in the long run nothing else compares.
Please share some of your basics that every buyer should know.
PS. A buyer with this knowledge will be a great client for several transactions.