With today’s low-interest rates and favorable rental conditions, many people are getting into property investment. For retirees or those nearing retirement, starting a rental business can boost your income and help meet your post-work lifestyle goals.
Getting Started
If property investment catches your eye, it’s important to assess the costs involved. This is particularly challenging for first-time property owners. Can you handle the financial commitment? Keep in mind, returns might take years to materialize, and the initial investment is a must. I know some retirees who decided to flip houses instead – buying, renovating, and then selling them to avoid dealing with tenants.
Despite the challenges, rental income can help stabilize your finances in retirement. If you don’t have a pension, rental income might be a critical supplement. With property values and interest rates expected to rise, you’re likely to see profits from property purchases. However, your decision should be based on your finances and the health of the local rental market.
Financing
Another key factor is how you’ll finance your investment. Will you go for a Freddie Mac mortgage or do you have the funds for a down payment? If these don’t suit you, consider alternatives like borrowing from hard money lenders or peer-to-peer funding sites. Whatever route you choose, do your homework. Some experts warn against carrying a mortgage into retirement, but the returns might justify it given the current active rental market.
Maintenance
Think about the problems you’ve had maintaining your home, then double them. As a retired landlord, you’ll need to handle maintenance issues, be it a leaking tap, clogged toilet, pest problems, or water damage. You’re responsible for keeping the property livable and safe for your tenants – it’s both a legal and moral responsibility.
Property Management
Does the idea of managing the rental property yourself seem too much? Consider hiring a professional property manager. While this isn’t cheap, usually costing around 10% of your rental income, the benefits often outweigh the costs. These professionals understand the market, local regulations, and handle the tedious tenant-related tasks. They act as your main support, taking care of everything from tenant communication to evictions. Keep in mind, though, that hiring a property manager doesn’t free you from your legal responsibilities as the property owner.
Real estate can be a valuable asset in retirement, offering supplemental income, potential tax deductions, and profit growth over time. But, given its challenges, make sure being a landlord fits your retirement and financial goals.