Subscribe to this blogRenting versus Buying: What Makes More Sense for Your Client?
Many people assume buying a home gets them ahead financially. But in some cases, renting makes more sense. As investors, it helps to understand the people we are doing business with and figure out whether it’s more advantageous for them to buy or rent. So put yourself in your prospect’s shoes and consider the following:
Renting makes sense for people who plan to live in the area for two years or less. If the person is not planning on staying for the long term, there’s a stronger chance of losing the money put toward the fees associated with purchasing property.
People with little or no savings, bad credit, and unstable employment are better off renting property until they have savings or change their financial situation. In this volatile real estate market, it is becoming more difficult to get a decent interest rate if the client is considered to be a risk.
Unlike home ownership, renting has no tax benefits, but if your client is in a lower tax bracket, they don’t have as much of a need for tax deductions.
How does the issue of renting versus home ownership impact us as investors? When we are buying property, we have two options: to hold for the long term or to sell. If you know your intentions with the property before you buy, you can capitalize on both markets. You can rent for the long term, especially if the property cash flows, or sell it straight out or on an option.
Knowing your exit strategy before you buy helps you make the most of your investment. Understanding the needs of the people who are occupying your property makes the tenant/new owner comfortable with you as a successful business person and a credible investor. Wise women who invest in real estate know their plan for each property, how to capitalize in their local marketplace and, most importantly, how to screen and qualify their tenants and potential buyers.
