Posted over 6 years ago

Preparing to Make Property Investing a Retirement Goal

As more baby boomers prepare to retire, questions arise about ways to fund their retirement. Even with savings, Social Security and retirement funds, the cost of living might exceed their income. People who are nearing retirement look for ways to supplement their income: one such idea being property investments. In many cases, an investment property can bring in $500 to $2,000 or more per month.

Will You Make a Good Landlord?

If the thought of owning rental property appeals to you, proceed with caution until you decide if you are cut out to be a landlord. If you have some time before retirement, try buying one or two rental properties to determine if being a landlord is a good fit for you. Remember that it can take time to generate a positive cash flow on a rental. Give yourself about five to 10 years to turn a profit.

Advantages and Disadvantages of Rental Property Investments

Before you make a decision about investing in a rental property, take a look at the following pros and cons:

List of Pros

Dependable monthly income — As a landlord, you can expect to collect passive income for at least year and possibly longer, depending on the term of the lease.

Tax depreciation — Tax benefits means that a married couple can defer $500,000 in profits.

Rent increases — Consider that a rental property that brought in $1,000 monthly two decades ago could now bring in more than three times that amount.

Fixed mortgage payments — If the market improves, you always have the option of refinancing, dropping your interest rate and your mortgage payment even lower while increasing your earnings.

Typically better returns than the stock market - Overall, investment properties tend to do much better than the stock market. The average person can also manage them much more easily instead of trying to figure out stocks, bonds, capital gains and losses and related investment strategies.

Property appreciation - For the most part, property values continue to climb while your mortgage will remain the same, which means that the longer you hold on to the property, the more you can charge for rent and the more you can recoup when you do decide to sell.

Transferable asset to your heirs - As well as benefiting you during retirement, you will be able to give your children a head start in the future by passing the property on to them.

List of Cons

Initial expense — You might need to make a down payment of up to 20 percent for an investment property.

Regular maintenance — Painting a rental or repairing a roof can easily cost $5,000. Even smaller repairs can add up quickly.

Flight Risk Tenants - You do run the risk of uncommitted renters: tenants who might not pay their rent in a timely manner or who abandon their contracts.

Possible vacancies — One way to protect yourself against the financial risk of an investment property is to keep six months of mortgage payments available if the rental is vacant for a time.

Difficulty liquidating the asset — If you need to sell in an emergency during a buyer


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