Rental Investments

Rental Homes=$$$$

Rental Properties for Retirement Cash Flow

Whether you have your retirement nest egg in an IRA, a 401k retirement fund, CD’s or a savings account, your funds have been in a state of flux for the last eight to 10 years.   The stock market causes you anxiety watching it rise, just to see it fall.  The rental market, while not for everyone has remained strong even with the recession as people need a place to live.  A large number of people were hit hard with losing their jobs and their homes and are in need of a place to rent while they rebuild their credit.  While this is unfortunate, these people make the best tenants.

When considering if rental property is a good fit for you, you will need to consider:

  1. Managing the Rentals – Will you manage the property or hire a management company?   While it seems easy enough to put a for rent sign out, write a lease and collect the rent every month, that is not reality.  There are Landlord/Tenant laws that must be followed.  If the tenants do not pay on time, you have to serve them notices and act within timeframes.  A management company will know the laws, serve the notices and their fees are a tax deduction for you.  Also, when there are repairs or complaints, the management company handles the calls for you, reducing your frustration.
  2. Repairs – Will you handle the repairs or hire a licensed handyman? You must always remember, your property is an investment and should be taken care of properly.  While it may be easy to replace a flapper in the toilet, can you handle replacing wax rings?  How do you feel about unstopping a toilet that is overflowing or replacing a garbage disposal?  If these repairs are left unattended, you may find they create larger issues like wood rot.
  3. Inspections – Your home should be inspected on a regular basis to ensure it is being property taken care of. Tenants will let thing go that can turn a small repair into a much larger repair just because they don’t want to be bothered.  A property manager will schedule inspections which will engage the tenant and make them think about how they are keeping the property.  The best part about rental properties is you will have an investment not only for your retirement, but if properly maintained it is an investment that you can hand down to your children.
  4. Cash Flow – While you receive passive income from your investment monthly, and a write off on your taxes, you will not have quick access, if the need arises, to a large chunk of money. You can get a line of credit, refinance or sell your investment, but you will be defeating your purpose of retirement income and may find you have over extended the value of the asset.

To determine if rental investment is for you, you should contact a real estate company that has a property management division.