While there are many benefits to owning rental property, Real Property Management East San Gabriel Valley answers the big question, “How can rental property income supplement retirement income?”
Many retirees have found that owning rental property can be an effective way of supplementing their retirement income. Real Property Management in Pasadena has found many owners who love supplementing retirement home costs as well with rental properties. But how can rental property income become retirement income?
First, let’s talk about the benefits of owning rental property:
Rental property income provides a steady and somewhat predictable source of monthly income. With higher rents in the Pasadena and Glendale areas we notice a lot more interest in the a high monthly income.
Owning rental property allows you to take advantage of various tax benefits, such as the ability to deduct most operating and maintenance expenses, including mortgage interest expense. You can also depreciate the structure (not the land). If you later sell the property, you’ll have to recover that depreciation. However, if you own the property until you die, your heirs can take advantage of a step-up in basis of the property, so that depreciation goes away.
Your property will likely appreciate over time, depending on how long you own it. However, you shouldn’t count on that. The deal should make economic sense on its own – without considering appreciation. Appreciation is just the icing on the cake.
A fixed-rate mortgage can serve as an inflation hedge. As rents and maintenance expenses rise over time, your mortgage will not.
Allows you to choose how much time you spend managing your property. You can either do it yourself or, if you feel your time is better spent in other activities, hire a property management company.
The following are some important considerations one should make before jumping into investment property ownership:
Planning is Key
First and foremost, plan ahead! The best time to begin investing in real estate is NOT when you’re in or near retirement. If you plan to mortgage your investment property, do so before you retire. Many lenders require applicants to have two years of steady employment in the same or similar occupation in order to qualify for a loan.
Who’s going to manage your property? Owning rental property may appear easy. After all, how difficult can it be to collect a rent check every month? But owning rental property can be much more time consuming than it would appear at first blush. There is much to be done – finding and qualifying renters, signing the lease, maintaining the property, responding to problems, periodically inspecting the property, following up on delinquent rent, handling evictions, etc. And there are laws and regulations that property owners must comply with. You can either do it yourself of hire a professional property manager to handle everything for you. If you choose to hire a property manager, deal only with a reputable company with a proven track record.
Whether you screen prospective tenants yourself or rely on your property manager do that, be sure the process is thorough. Remember, you’re entrusting your retirement investment in them.
Keeping your rental property leased can sometimes be challenging, particularly if the location or conditions are not ideal. Some experts suggest investors in income-producing property should keep at least six months’ worth of reserves on hand in the event the property remains vacant.
Remember to set aside money for. You have an obligation to maintain your rental property in habitable condition, so you won’t have the luxury of delaying necessary repairs and maintenance until you can save the money.
Owning rental property isn’t for everyone, but it can definitely work for your retirement if you plan and are prepared.
Be like many others who have trusted Real Property Management in Pasadena and help with your retirement investments.
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