When it comes to developing a financial plan for retirement, there are many investments that can support you through your twilight years. Real estate is one such option.
While diversity in your investment portfolio is almost always a good idea, rental properties can be a great way to cover your expenses through recurring passive income. Alongside a 401(k), having investment property can mean a comfortable and lucrative retirement—but there are a few items to keep in mind.
Rental properties aren’t the best fit for everyone. Here’s what you should be aware of before securing your own retirement through real estate investment.
Rental Income Has Tax Benefits
Struggling with a tax burden can be a problem for many retired investors. Here, however, rental properties can be a helpful asset to have.
Property depreciation can be deducted from your tax obligations each year. As a result, you can cut down and sometimes even negate your tax liability associated with your rental income. If you’re looking for an investment source that can provide helpful tax deductions, rental property can be the perfect investment to hold into retirement.
Rental Income isn’t Always Consistent
The nature of rental property entails a bit of risk and inconsistencies. While ideally your properties will accrue the expected monthly income each month, this cannot always be the case. Emergence maintenance, evictions, damages, and vacancies will occur, creating interruptions in cash flow.
Many retirees look for solid and reliable returns from their investments. Rental properties can certainly fit that bill, but maximizing the potential of your asset takes care. Experienced property managers can help.
Rental Income Can Sustainably Grow Your Resources
One of the biggest draws of rental property investment is that a rental can be a great way to generate recurring income into retirement without exhausting other sources of capital.
Many of us choose to withdraw money from an investment account, running down our assets over time. Rental properties, on the other hand, maintain capital while providing income. For retirees hoping to leave assets behind for progeny, real estate is a great option.
Securing Investment Income Takes Time and Dedication
One drawback of investing in real estate, however, is the amount of time and dedication it can take to get your investment right. Not every rental property is going to effectively turn a profit. The success of your investment depends on thorough research from the beginning paired with effective management.
Whether you choose to hire a property manager or intend to manage the property yourself, expect to put in extra resources. For example, set aside 15-20% of your rental income revenues to pay for repairs and emergencies outside your regular budget.
When it comes to rental properties, revenue takes work. Fortunately, however, you don’t have to go it alone. Property managers can help you maximize the value of your asset for only a minimal portion of your returns, taking the time commitment and stress off your hands.
Bottom Line
For retirees, the prospect of rental property investment can mean added security and continued capital growth. However, rental properties can take extra dedication and expertise to maximize income values.
Consider working with a property management company to secure worthwhile, high-ROI properties. In turn, you can develop a strong nest egg to help you thrive in retirement.
For more information on real estate investment and property management, contact 208.properties or find us on social media.
