Landlord Toolkit: How to Fund Your Retirement with Rental Income
Many people dream of the day when they can leave the workplace for good and devote their time to family, a little rest and relaxation or their favorite hobby. In fact, according to Transamerica Center’s Annual Retirement Survey, 77 percent of workers in 2016 are actively saving for retirement, either through their employee benefits or a source outside of work. Some people leverage a rental property as a source to fund their retirement income. If managed effectively, renting out property may help provide the necessary funds to help you retire in your chosen time frame. So, how can you help pay for your retirement with rental income? Follow the tips below to help get the most profit out of a rental property.
Pick the Right Property
Whatever your budget, owning rental property can be very rewarding — if you pick the right property. Consider consulting a real estate agent who has experience with rental properties, says U.S News and World Report. The real estate agent may be able to help you find a neighborhood that is desirable to prospective renters. You may also want to think about the potential cost of repairs and maintenance on the property, adds the site. You don’t want to purchase a property that may need some major repairs that go beyond the cost of the rent you’re collecting.
Save for Expenses
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. Be sure to also have an emergency fund set aside for unexpected breakdowns.
Adjust for Inflation
Rental prices typically fluctuate based on many factors from what’s going on in the housing, labor and stock markets to the overall rental demand and supply in a community. According to the National Association of Realtors, you may want to consider increasing your rent 1 to 2 percent each year to help account for inflation, so you can maintain your profit margin overall.
If you follow these tips and become a smart landlord, you may generate some income that can help make your dream of retirement more of a reality.
Originally published on July 8, 2014.