Each year as spring approaches, many people review their personal financial situations as part of their income tax preparation process. No such review would be complete without an assessment of the value of their homes, which for most people, represents their largest asset.
While real estate ownership can certainly enhance personal portfolios, it also has the potential to create financial problems. Mistakes made during the acquisition, management and disposition of real property can have a serious impact upon personal net worth.
To gain a better understanding of today’s real estate considerations, Hendersonville Lifestyle sat down with Certified Financial Planner Jonathan Walker, a longtime investment adviser who manages the Paul Winkler, Inc. office in Gallatin.
What advice would you give to prospective homebuyers?
- “First and foremost, be patient. Don’t fall in love with a particular house. You have to be able to walk away from it; otherwise you are at the seller’s mercy, and you will likely overpay. Remember that purchasing a home is a transaction, just like buying gas for your car. You have to be able to separate your emotions from the transaction.”
- “Second, remember to negotiate. Many people think that because the Hendersonville area has become such a seller’s market that they cannot bargain with the seller. If a seller will not negotiate on the price or other conditions, be prepared to walk away from the transaction if you are not comfortable.”
- “Never make an offer within the first 24 hours; sleep on it first. Take the time to lay out a pros and cons list to make sure that you can evaluate the prospective purchase on a rational, non-emotional basis.”
What are some considerations in downsizing to a smaller home?
- “When evaluating downsizing, clients should first develop a list of reasons why they are considering this option. For example, maintenance costs, change in marital status or empty nesting may all be valid reasons for downscaling. Major financial and lifestyle decisions need to be made on a rational, non-emotional basis. Numbers rarely change, but how we feel about them does.”
- “Take the emotions out of play. A lot of people who have raised children or taken care of parents in a home tend to have a lot of memories attached to the house, and they may be reluctant to sell even when it is the right thing to do. They need to remember that their memories are part of them, not part of the house.”
What are some considerations regarding rental properties?
- “As a rule, I am not a fan of rental properties as investments. Most people are not landlords by design.”
- “Consider why you want to get into rental property. Are there valid reasons, or have you just been watching too much HGTV?”
- “Don’t fall into the trap of thinking that rentals will increase your net worth. It won’t because you will pick up a loan liability that will offset the asset side of the transaction.”
- “Learn what it means to be a landlord. Talk with other experienced rental owners to get a reality check about such problems as eviction, squatter’s rights, maintenance, etc.”
- “Remember that for most people, the rate of return on rentals is not worth the headache.”
Reverse Mortgages
- “Today’s reverse mortgages are much better products than in years gone by. Recent legislation has incorporated consumer safeguards to help protect seniors from abusive products and practices.”
- “Used properly, they can be a nice financial planning tool, particularly for people without children or people with children who are not interested in the home.”
- “Evaluate them like any other service. Understand what you are paying for it, why you are paying it and decide if you are comfortable with the value proposition.”
Jonathan Walker
150 N. Water Ave.,
Gallatin
615.461.8653