"We Want to Buy a Rental Property"

Planners Title (planner's focus):
Analyzing the purchase of a rental property.

Personal Title (client focus):
We want to invest in real estate and collect rents.

Case background:
My clients had come to me to investigate the possibility of them purchasing a rental property. They were deciding whether to demolish their current home and replace it with a two-family structure. I told them we needed to talk about how they felt about being displaced temporarily while their home was being demolished, along with the obvious costs. In addition, I said we would need to discuss whether or not the added rental income would cover the expenses of the renovation and reconstruction.

What happened in the meeting:
We used a Bernie book to go through their current living expenses. In about 15 minutes, we had a firm number for discussion as to their monthly expenses. We further investigated the potential cost to reconstruct the home, and then factored in the new expense of the additional mortgage. We also factored in the added income from rents.

How did it turn out?:
In the end, my clients realized they would make enough added revenue to cover the expense of the new mortgage and increased real estate taxes.

Notes to myself on the meeting:
I will revisit the numbers to be sure I have given my clients an accurate recommendation. I will also advise my clients as to the near disaster they would have faced had they gone through with this transaction.