7 Things to Consider before Improving Your Rental Property

7 Things to Consider before Improving Your Rental Property

In the context of comprehensive financial planning, our clients often want to know if it makes sense for them to improve their rental property. This is a really good question, and we think there at least 7 things to consider before making such decisions: Obtain comparisons. Before making improvements, it makes sense to obtain comparisons from other rental units that have similar upgrades so that you can find out how much more you might be able to obtain in rent for making improvements. These comparisons can be obtained on Craigslist and other rental websites. Get local advice. Have a local real estate professional who is familiar with the area come take a look at your property and provide you with her/his perspective on what improvements/repairs might result in higher rents. A local professional is often very familiar with surrounding properties and can be an invaluable resource. If the agent thinks there’s a possibility of gaining you as a client at some point, then you can often obtain their feedback at no cost. Be careful not to make upgrades that your local market won’t support. Some people make the mistake, for example, of making high-end improvements in a rental market where those improvements won’t increase their ability to obtain higher rents or increase the value of the property. Personal knowledge and judgment is paramount here; some landlords maintain a strategy whereby they aim to keep repairs and improvements to a minimum, and they’re still able to attract enough in rents to make a profit. Others landlords, however, need to make improvements in order to get their rents to a place of profitability....
Client Success Story: Senior Executive Gets Peace of Mind

Client Success Story: Senior Executive Gets Peace of Mind

One of our clients is a C-level executive for a large international company. He came to our firm with a complex set of needs ranging from restricted stock planning, real estate investment needs, concerns about his investment portfolio, and worries about his overall risk management plan. His primary goals were to build wealth and to protect it. After analyzing his financial situation in great detail, we were able to help him devise a risk management plan that gave him significantly better insurance coverage for his real estate portfolio, and we also rescued him from some very poor whole life insurance products. We also helped him devise a much more robust life insurance, property & casualty insurance, and disability income insurance strategy. When we first sat down, his group disability income insurance was no where near sufficient to protect his family in the event of a long-term disability. After working with his HR department, we were able to build an executive-level supplemental disability insurance strategy that augmented his disability coverage from about 60% of his pay to around 80% of his pay. For someone at his income level, this was a critical risk that needed to be ameliorated. He also completed the financial planning process with an investment strategy, a clear retirement plan, and some advice on what to do with his restricted stock. Most importantly, our client had peace of mind that his family would be taken care of financially in the event something were to happen to him. Every client has different goals, but this was a clear example of a client who was able to greatly benefit from...
Client Success Story: How Financial Planning Made a 30-Year Dream a Reality

Client Success Story: How Financial Planning Made a 30-Year Dream a Reality

(Drone Video of Alpen Way Chalet Mountain Lodge) Every day we talk with clients about our financial planning process. Step two in the process is where we spend a lot of time defining client objectives. Several months ago, we were approached by some clients who had a very clear objective: For thirty years, their goal was to own their own bed and breakfast in Colorado. After four months and, after assembling a team of more than ten professional advisors, we’re happy to announce that our clients are now the proud owners of Alpen Way Chalet Mountain Lodge in Evergreen, CO. Not only were we able to make our clients’ long-time dream a reality, but we did so in the context of a comprehensive financial planning process that also examined where owning a business fit within their broader retirement, tax, estate, risk, and investment planning objectives. This was a clear example of how financial planning can be beneficial, and also how it’s always centered on a client’s...
Why You Need Home Title Insurance

Why You Need Home Title Insurance

Have you ever looked through the list of fees when closing on a home mortgage and wondered why you had to pay for title insurance? The paperwork from any lender can be overwhelming and, while some fees are negotiable, the one fee you can’t avoid is the line item for title insurance. What is it? Dan Rafter over at WiseBread.com explains the importance of title insurance: To sum up, title insurance protects you from clerical errors, mistakes in property records, or unpaid taxes involving the home you are purchasing. Maybe the past owner of the home hasn’t paid property taxes in years. If you buy the home, the government agencies levying those taxes will come after you to pay them — unless you have title insurance. Or, maybe a past seller bought the home with a sister. Maybe these two siblings had a falling out, and the brother sold the home without telling his sister. That spurned relative could come after you for the profits she says she is owed from the sale — again, unless you have title insurance protecting you. Title insurance is like most other forms of insurance: You pay for it in the hopes that you’ll never need to use it. Title insurance covers the window of time before your ownership of the home, protecting you from certain claims and legal fees that were beyond your control. Even though it extends backward through time indefinitely, coverage ceases on the date you take ownership. If you decide not to pay property taxes once you’re the official homeowner? That’s on you. In short, title insurance is important and...
Trends in Household Wealth

Trends in Household Wealth

Where do the wealthiest people in the U.S. hold their wealth? According to Edward Wolff, a Harvard and Yale trained economist who teaches at NYU, the following is a breakdown of where people with a net worth of more than $7.7m hold their assets. This data can be found in Wolff’s, “Household Wealth Trends, 1962-2013: What Happened over the Great Recession?”, a working paper that was prepared for the National Bureau of Economic Research. 8.7% of their wealth is held in their principle residence. This in contrast with the middle class (net worth of $0-$401,000), who hold 62.5% of their wealth in their primary residence. 6.1% of total assets is held in cash. 27.3% is held in stocks and financial securities (This includes stocks, bonds, and assets held in various types of retirement plans). The middle class only holds 3.4% in these vehicles. 47% of their wealth is held in business ownership and real estate. The middle class only holds 8.6% in businesses and real estate. 1.9% is held in gold and other precious metals, royalties, jewelry, antiques, furs, loans to friends and relatives, futures contracts, and other miscellaneous assets. And, as a class, 75% of the wealthy say they own other real estate, and 85% say they own other securities e.g. stock and mutual funds.          ...
Why Debt Is Not Always Bad: Understanding Your Debt to Equity Ratio

Why Debt Is Not Always Bad: Understanding Your Debt to Equity Ratio

An important part of analyzing the health of a business involves taking a look at its debt-to-equity ratio. A company’s debt-to-equity ratio tells analysts and prospective investors how much debt a company holds relative to its assets. This is expressed by the following formula: Debt-to-equity ratio = Total Liabilities  / Total Shareholders’ Equity (i.e. assets minus liabilities)   Analyzing a company’s debt-to-equity ratio is helpful because it tells investors how efficiently a company is running its business. In an article for Harvard Business Review, Amy Gallo explains that “if your debt-to-equity ratio is too high, it’s a signal that your company may be in financial distress and unable to pay your debtors. But if it’s too low, it’s a sign that your company is over-relying on equity to finance your business, which can be costly and inefficient.” Many of us have heard from our grandparents, especially those of us who have relatives who lived through the Great Depression, that we should avoid debt at all costs. In a debt-saturated country such as ours, this is not necessarily a bad thing for us to hear. While keeping debt low is usually a sign of financial health, there are cases when having too little debt, or not making efficient use of debt, can be detrimental to one’s financial success. Just as a company needs to make efficient use of debt in order to grow, an individual can, and often should, do the same thing. A similar formula can be expressed for individuals: Debt-to-equity ratio = Total Liabilities  / Total Assets I have clients, for example, who have accumulated significant estates and who are in a position to grow them. The germane...