A client’s cash flows are one of the most important things you need to understand and consider. Any impact on a client’s cash flow could see the entire strategy compromised with potential for great financial loss.
Cash flow is made up of income and expenditure, with the remaining component representing the surplus or deficit position. Naturally, consistent and reliable cash flow is paramount to being able to provide direction to a client, given the financial amount at stake when referring to property investing.
Many clients find that once they have worked through this part of their planning exercise, additional funds are available to them. Where expenses are higher than after-tax income, the client is clearly in no position to invest. All clients need to be informed that their financial commitment to property lasts for the lifetime of the investment and if they are borrowing funds to purchase the property, there will be regular loan repayments. If they will be relying on rent for loan repayments, they need to be able to service their loans should they experience a period without tenants. They also need to make provision for the cost of repairs and maintenance.
|A young client has presented for the initial consultation. Your fact finding has identified little in the way of assets and income to support a property investment at this time.