Many people consider real estate as an option for a steady retirement income. It certainly is an excellent option because it is one of the best ways to generate strong returns regardless of age. People will always continue to buy and rent homes, so one can really secure a comfortable living by investing in this market.
However, before you go and start investing, you need to know a lot about the real estate game. For example, every person getting into the industry has to be aware of numerous ways to invest as well as all the taxes you’ll have to pay.
Let’s make sure you know whether real estate is a good choice for your retirement.
Are Rental Properties Better Than Traditional Investments?
Investment is rental property is a good idea because it leaves you with a fair amount of control over your money. Other traditional investments do not provide this opportunity. For example, when you invest in another popular option, the stock market, you don’t have any real control of your investment. Of course, you can select what to invest in, but there is no way to know or make sure that the business or bond you invested in will perform great.
On the other hand, you have complete control with real estate. Yes, there is a good chance you will encounter problems like bad tenants and broken pipes, but still, you are the person in charge.
Can Real Estate Let You Plan Your Retirement Easily?
Let’s continue with comparing real estate with stocks and bonds to give you a better picture of how it allows to retire easier. For example, if your investment is in stocks, you will have to continue to invest every year to achieve your individual retirement goal (a retirement calculator defines how much). Therefore, you will have to guess the rate of return stocks as well as the number of years you will live.
In contrast, real estate eliminates this problem because it provides the owner with a monthly cash flow. So, there is no need to guess when you’ll die and hope for a higher rate of return. You just have to determine how much money you need per month and purchase enough rental properties to provide that money.
How Many Buildings Will You Have to Buy to Retire Comfortably?
This one is easy. Just determine how much money you need per month in retirement and multiply it by how many rental properties you have. You also need to know that there is a good chance the monthly cash flow from your properties will increase over the years. The rental rate will be influenced by various factors like economic indicators. For example, you can start renting a house for $800 a month but after one year the value could jump to $1,000.
Of course, you should not rely on the appreciation because there is now way one can predict it. However, it’s safe to assume that the rates will increase over time.
“To be certain, you might create a detailed plan for expected rental property returns, says Rachel Morrison, a real estate advisor from Assignmenthelper.com.au. “It will help you to discover how many houses you need to reach your retirement goals.”
So, What Should I Know Before Buying Rental Property?
Well, there is a lot of things you should know before getting into this business. For example, you need to select the most attractive pieces of land or properties that will pay off quicker. By analyzing the market, you will have to learn how to have intuition about what areas of a city might become popular and which areas to avoid.
There are many tax considerations and record keeping requirements as well. For example, you will have to pay property taxes even when the house is vacant. Plus, don’t forget about broken pipes and other maintenance concerns and refurbishing between tenants.
When a great property becomes available, there will many people going after it. Therefore, you must act quickly to get the property. To do that, it is highly recommended to start saving cash as quickly as possible. The resonance of the phrase Cash Is King becomes reality in this market. However, it should be modified a bit to resemble the current situation: Cash In Hand Is King.
The Bottom Line
Is rental property a good way to generate strong returns for your retirement? Yes, absolutely. It has a number of advantages over traditional investments such as bonds, such as more control of your investments and a steady flow of cash.
Of course, there are a lot of things you will have to learn to be successful in this market, but rental property is an excellent method to get a reasonably steady, and a mostly predictable, income stream. This is what you need for the retirement.
Lucy Benton is a marketing specialist, business consultant and helps people to turn their dreams into the profitable business and currently works for paper writing service. Now she is writing for marketing and business resources. Also Lucy has her own blog ProWritingPartner where you can check her last publications. If you’re interested in working with Lucy , you can find her on FaceBook and Twitter.