Question of the month: “How are my real estate assets included in my financial plan?”

Our Two Minute Take

Let’s say that you own real estate, either as your primary residence, or as an investment.

What are some of the ways that we take that into account when you create and update your financial plan?

• Property taxes. Whether or not you live on the property you own, you’ll pay property taxes. The difference is that if you own it as a real estate investment rather than your primary residence, you’ll be able to write those property taxes off against rental income received.

• Estate planning. The last thing you’d want to do is have a large asset like a home be seized by creditors or gifted to the wrong person after you pass. It’s important to look at the title to your property and how it is positioned within your estate. Should you be holding your property in a trust to protect it better? If so, what type?

• Mortgage. Most real estate owners have some sort of mortgage, and it’s important not to just “set it and forget it.” Your mortgage is probably one of the larger household expenses you have to pay on a monthly basis. As part of your financial plan we should look at the terms of the loan and determine if there is opportunity for improvement (such as through refinancing). It’s also important to look at what the overall impact of the mortgage is on your cash flows. Is the monthly payment making you “house poor” or is it affordable relative to your income?

• Insurance. Extreme weather can cause harm to your property. In some areas of the country such as California and Florida, homeowners insurance is becoming harder to get and sustain. It also may be hard to retain your insurance policy if certain conditions exist (30 year old roof, for example). Having less coverage than you need, or even having coverage dropped unexpectedly, can strain cash flow. It’s important to look at these policies on a periodic basis and make sure you have what you need.

There’s our Two Minute take – hope you got through it in two minutes (or less).

What questions do you have about your real estate asset? Send me a note and maybe we can talk.

Thanks for reading!

-Dwight