The retirement age seems to be getting older every year, and for many, it’s not by choice. Many people dream of the day when they can leave the workplace for good and devote their time to family, a little “R & R” or their favorite hobby. In fact, 78 percent of workers are actively saving for retirement, either through their employee benefits or a source outside of work. Some people can leverage rental property as a source to fund their retirement income. If managed effectively, renting out property could provide the necessary funds to help you retire when you want to. So, how can you pay for your retirement with rental income? Follow the tips below to get the most profit out of a rental property.
Start Saving Early
Buying a rental property means incurring the same costs as if you were buying a home to live in yourself. Try to save a certain amount of your income each month in a separate account and don’t touch it unless it’s for the rental. Landlords are responsible for a down payment, closing costs and any repairs once the home is purchased. Set up an emergency fund as part of your budgeting so you have a source for capital improvements that need to be made.
Pick the Right Property
Whatever your budget, owning rental property can be very rewarding – if you pick the right property. To find a property that will help provide long-term return, look for these characteristics:
- Having a property close to your home makes it easier to manage.
- A property in a desirable and growing neighborhood is appealing to buyers.
Size: Potential equity can be found in single-family homes with a spacious lot for future additions and renovations. Schools: Both young and established families prefer to live near good school districts. Age: Older homes may require more repairs and ultimately could cost you in the long run (not to mention higher insurance rates).
Adjust for Inflation
Rental prices don’t always drop when housing prices do, but they will generally go up with the market. By increasing your rent 2 to 3 percent to account for inflation, you can increase your profit margin overall. Most people want to retire and be able to enjoy their later years without having to work, but it seems that is getting more difficult to achieve. If you follow these tips and become a smart landlord, you may generate supplemental income that can help make this dream more of a reality.
Hands Off or Hands On?
Investing in real estate does not guarantee that you are getting a hands-off (aka passive) investment; it can become quite the chore. We take late-night phone calls from our tenants with an emergency. The simple truth is that houses deteriorate or wear down. Residential properties take work to maintain. While you can purchase newer homes, it still doesn’t guarantee that something won’t go wrong. Because tenants don’t own the property, it can be true that they won’t take care of it like they would if it were their own property. Cleaning up after tenants and getting ready for the next tenant can be a lot of work.
Rental properties can also be a truly passive source of income. If you hire a property manager, you don’t have to worry about the day-to-day tasks. They take care of all of the things that can make real estate investing not passive (emergencies, necessary repairs, etc). You are still responsible for the bill, but for a minor fee, you can take away a lot of stress. There is nothing better than owning a rental property that is getting paid off by the tenant and managed by someone else. That’s right – the only thing that is required of you is the financial risk.
Beyond the security and the potential for a passive income, rental properties also offer you a huge tax benefit. There are generous tax benefits that involve depreciation which will minimize the taxable income from real estate – consult with your accountant for more details.
What can I say? Yes, I sell Landlord policies for nearly every situation, call me to determine the right one for yours – toll-free at 844-675-2111 or e-mail me at email@example.com or visit http://www.springfamilyinsuranceagency.com/landlords.html