Why Your One Investment Property Isn’t Enough To Retire On

So, you dream of purchasing a single rental property, placing a high quality, long-term tenant in it, collecting rent for years to come, and using that to fund your entire retirement, do you?

If you said this to a real estate professional, he would likely scoff at you.

And rightfully so.

Hoping to retire on one single rental property is not reasonable for most property owners.

That is, unless you have a high priced piece of property that is completely paid off, and is providing you nothing but positive cash flow at all times.

And even then, one property still might not provide enough for you to live comfortably in retirement.

The truth is, many people stop at one or two rental properties with high hopes of retiring and never worrying about money again.

And, while it is difficult to say exactly how many rental properties you will need to fully retire, it is relatively easy to say one is not going to cut it.

Let’s take a look at some of the reasons your one rental property isn’t enough to retire on, and how you can get divert this problem into a welcomed success instead.

Why One Rental Property Probably Isn’t Enough for You to Retire On

Rental properties are a great way for people to invest their hard-earned cash. In fact, owning a rental property provides you positive cash flow, tax advantages, and options to leverage your money in ways that would not otherwise be possible.

Further, investing in rental properties as a way to fund retirement can be far better than investing in the stock market.

In the stock market, you have very little control when it comes how your money is invested. You cannot force the company or bond you invest in to perform better and make you more money. Even worse, you cannot control the economy and the state of the stock market.

On the other hand, by putting your money into rental properties, you can control how your money is invested. You decide when to purchase a property, whether the purchase price is below market value, what to repair and upgrade in the rental, and how much to charge each month in rent.

Better yet, you can have an experienced property manager handle all aspects related to renting out your property, so that you don’t have to worry about a thing.

That said, trusting one rental property to float you into and through retirement can be quite unreasonable, and honestly quite risky.

Take a look at why:

• One rental property that is not paid off will not yield a lot of positive cash flow
• One rental property that is paid in full can only yield market value rent rates (if you hope to have it occupied at all times), which is often not enough to live off of
• Market downturns can happen at any time, reducing your one rental property’s rent rate, and thus your monthly income
• Unemployment rates, major construction, and unreliable tenants can create longer than hoped for vacancies, leaving you with zero monthly income
• Major emergencies and repairs can become costly and cut into your monthly cash flow

As you can see, there are many variables that can affect the amount of cash flow you receive each month, how much you can ask for in rent, and how much money you actually end up with in your pocket at the end of each month.

Relying on one single property to retire is simply not enough.

Not even when things are perfect.

And, if you have been a property owner for any amount of time, you know that things are never perfect. There are always issues that threaten to cut into your monthly income and take away from your positive cash flow.

How Many Rentals Do You Need to Retire On?

Although one rental property is not typically going to suffice when it comes to funding your retirement, there is still hope.

Here are some excellent tips that you can follow to help you determine just how many rental properties you might need to retire.

1. Make a Plan

Many property owners have the dream of retiring off the income their rentals generate for them, but never actually devise a plan for how they will get there.

Try estimating how much annual income you will need to retire comfortably on, and work backwards from there.

To start, imagine:

• How many rental properties you will need to purchase
• How much each property will cost each year in mortgage payments, repairs and maintenance, etc.
• How much cash flow each property will generate for you

Add the numbers up and match them with your desired end result to see just what kind of portfolio you need.

2. Set Reasonable Goals

As mentioned earlier, the chance of you retiring off of one sole rental property is slim-to-none, unless you have a $1 million investment property that is in high demand at all times.

However, this situation is simply not realistic for most property investors.

Sit down and evaluate how you see yourself retiring, and what it will take to get you there. You might be surprised at how many rental properties you are going to end up needing after all.

3. Ensure Capital Growth

It is important you invest in high quality properties that will not only yield you monthly rent payments, but will increase in value over the course of time.

As your property’s capital growth increases, you can use it to invest in more properties and expand your portfolio. From there, you can yield more positive cash flow and better fund your retirement.

Are you starting to see how you will need more than one rental property to retire on?

4. Start Early

Just as financial advisors recommend young people start saving for their retirement as early as possible, property owners should begin investing in rental property as early as possible.

The longer you own your rental properties, the less debt you will owe on them come retirement, the more capital growth they will have accumulated over time, and the better chances you will have of building a big enough portfolio to actually fund your retirement.

In the end, there is no magic number when it comes to how many rental properties you will need to retire comfortably.

However, it is almost guaranteed that number will be bigger than one.