It seems in recent years that retirement age has slowly, but steadily been getting higher and higher. For most people, this is not by choice. Most people dream about a day when they can finally stop working altogether and devote their time to the things they love like family, hobbies, or even a little R&R. According to Transamerica Center’s 15th Annual Retirement Survey, some 78% of American workers are actively planning for their retirement by saving for that day they can finally call it quits. They use all sorts of creative ways to procure that seemingly elusive nest egg; everything from employee benefits, to sources outside their jobs in order to fund their retirement. Many people are beginning to look to rental properties to procure that extra capital and create viable revenue streams they will need when the time comes. Below you will find some tips that may prove helpful should you decide rental property may be right for you.
Choose the Property Wisely
No matter the budget you have to deal with, rental properties could prove very rewarding, even lucrative. When selecting a property you want to provide long term returns, keep an eye out for the following:
- Location- A property close to your own residence could very well prove far easier to manage.
- Size- Equity potential abounds in single family housing and choosing a property with a large lot can provide for future expansion and/or renovation to increase your income potential.
- Schools- Both younger and more established families prefer to be located in good school districts. A good district can not only draw better tenants, but will also prove easier to keep rented.
- Age- An older home may seem like a bargain, but consider the care and maintenance of an older property. Not to mention, unforeseen problems could prove very costly and severely affect your R.O.I. (Return on Investment)
Purchasing rental properties is not much different than purchasing a home to live in in terms of expenses. By saving a certain amount of each paycheck in a separate account you don’t touch will help you accumulate the necessary funds more quickly.
You will be responsible for the down payment, any closing costs, and whatever repairs may be required so make sure you also set up an emergency fund to cover unforeseen costs.
Always remember to include the cost of landlord insurance in your plan.
Watch Inflation and Adjust Accordingly
When housing prices drop, rental prices not always do. However, you can usually count on increasing rents when the housing prices rise. By increasing rent by 2-3% annually to account for inflation, you can steadily increase your own profit margins.
While the dream of a work free retirement is seemingly almost a thing of the past, and at best difficult to realize, by following these simple steps you may be able to build a retirement that allows for the achievement of just that!