To earn income from your retirement fund, it’s best to diversify into investments, one of which is investing in real estate, since real estate can be a source of income, especially in rental properties, because where there are tenants, there is money coming in every month; however, so as not to waste your precious retirement fund, take time to study the market and learn the trade so you’ll have a good idea of what are the upsides and the downsides of the business.
Learn everything on real estate investment
Know what you are doing, if you plan to use a portion of your retirement money for investment in real estate rental properties, such that take time to get knowledge on this business by reading good books about it, attend seminars from a recognized real estate company, consult with a friend lawyer who has had experience in real estate cases.
Investment considerations on rental properties
Commercial office space, apartments or duplexes, or residential homes, all these are income producing properties known as rental properties, but before investing to buy any of these properties, you should try to consider first the pros and cons of this kind of business, such as: rental property does not guarantee a 365 days rental, which means there are lean months that the space is vacant; this business requires record keeping, which entails regular examination of rent payment; while there is the advantage of a rental real estate tax deduction but you will have to recapture the depreciation value when you resell the property; rental will definitely rise over the years, but you also have to spend on maintenance and upkeep; the cost of investment is high and ROI will take some time, so be prepared to wait but because you’re retired, make necessary computation when you’ll be getting the real income; if you plan to let a property management company handle the management of your rental property, you have to pay between 7 to 10% of the total monthly rent.
What to consider in a rental property
Elements to look for when buying a rental property are: a single-family home or space that is located in a good school district; buy a property large enough to accommodate future additions or renovations; see to it that the property can generate positive cash flow of at least 6% above cost; and, if possible, a property that is close to your home.
Make good inspection of a potential rental property
Try to follow these guidelines, before you buy a potential rental property: hire an experienced building inspector to rule out repairs and problems like the building foundation, roof and home structure; determine monthly costs of insurance, taxes, mortgage fees, maintenance fees; consult a tax adviser for any tax implications; consult a real estate agent on comparable rentals in the area, how long properties stay vacant.
To avoid the risk of having bad tenants, use these guidelines: go through the process of carefully selecting tenants; ask for recommendations from previous landlords or employers; ask a real estate lawyer to write a lease agreement; and get a landlord insurance if case of damage to property by a bad tenant.