Still, it is important for advisors to remind clients that they are not professional real estate investors. And there is always the risk that higher interest rates, whenever they appear, will cause home prices to slip, said Mike Piershale, president of Piershale Financial Group in Crystal Lake, Illinois.
“We’re cautioning against buying properties right now unless you’re planning on staying in them,” he said.
Still, advisors say most clients are wary enough following the bubble and crisis, and for well thought out plans, it is time to act.
A client of Bilton’s, at Merrill Lynch, had enough cash to outright buy a second home he had long been eyeing in Sarasota, Florida. Instead, Bilton helped him get a 10-year mortgage at 2.75 percent. After a tax deduction for mortgage interest, the client pays just 1.5 percent on the debt, and reaps a 3 percent yield on other investments.
The move was “a no-brainer,” Bilton said. “That’s what we call positive interest rate arbitrage.”