Posted on May 1, 2016
Golden Years Can Be Made More Financially Comfortable With Real Estate Investments
Real estate investment is a feasible option for bringing about supplemental income and diversifying personal income. Specifically, these investments can introduce ample retirement income for investors interested in focusing on creating wealth for their golden years.
Ideally, retirement is the time in one’s life when one can sit back and reap the benefits of decades of hard work. Social security, annuity payments, retirement fund distributions, and, hopefully, a sizable pension should help to ensure that these years are indeed quite comfortable. Some forward-thinking individuals may recognize that they don’t have quite enough lined up to ensure financial comfort during those years, and they’ve turned to real estate investing in order to add to their retirement income stream.
With that said, deciding to invest in real estate isn’t necessarily as easy as 1-2-3. In fact, it requires that investors do homework, do the legwork, and put in the work. It isn’t for the faint of heart, it’s work may require that you deal with difficult tenants, electrical issues, vacant rental units, and innumerable conflicts and concerns. Only those who are willing to roll their sleeves up and devote time will realize the true value of real estate investment as a satisfying option for diversification and an additional path toward income creation.
Investment isn’t simply about bankrolling a project, the action can help to bring balance to an investment portfolio. Also, if that property happens to have been managed well, it will bring in an abundance of income no matter economic conditions, and it can appreciate in value over years, which will be beneficial to an investor.
Presently, real estate investors are in a terrific position, thanks to low-interest rates and rapid rent increases, which will continue its pace for another two to three years. While the growth in rent is bad news for renters, it’s excellent for those interested in property investment.
So, what are the steps that an individual has to take in order to become a goal-oriented real estate investor?
Begin by saving money. After gathering an adequate amount of cash, so that you might successfully afford a down payment, you should seek pre-approval for a bank loan, which will allow you to quickly acquire a great property. Always analyze your finances before pursuing an investment. Verify rental rates, consider the cost of upgrades and upkeep, and make sure you have access to a real estate agent who’s educated in the workings of real estate properties.
Real estate investments are the most profitable for those who calculate finances so that income from renting covers the cost of insurance, mortgage, upgrades, upkeep, and repairs. Research and financial planning are crucial parts of designing an investment and retirement plan.
From the current owners of a property, request a detailed profit and loss statement when considering a property, and utilize the IRS Income Tax Schedule E to determine if an investment property is worthy of purchasing. Numbers can be inputted into the tax schedule to see gauge whether expenses can be covered with the income coming in from rent.
Novice real estate investors should consider starting small, rather than opting to take on a large project. For instance, consider renting out two or four-unit apartment buildings. However, be weary of single-family home investments because you don’t want to be liable for the entirety of vacancy rate; vacancy risks are greater with smaller investments.
The trick is to locate a property that’s affordable for you, as a buyer, and for potential renters. That means selecting a property with a median property value ($210,000), which has the greatest risk and can invite a reasonable rental rate. Obviously, roomy units in desirable neighborhoods that have excellent schools will be attractive to renters, so always have that on your radar. If you know anything about real estate trends or potential areas that may receive an influx of residents, then seek that out. Well-established areas tend to have a lower return rate while return tends to be greater in “hot” and up-and-coming neighborhoods.
Some other things to consider: think about choosing a property that’s close to your own home for convenience sake. Also, choose your tenants carefully. It’s important to screen for financially responsible, reasonable, and clean tenants who will respect your investment. Your return can be damaged if litigation or eviction become an issue for tenants. Real estate investment is a true, long-term commitment that demands attention and awareness.