Rental Properties As Retirement Income

Are rental properties a viable source of retirement income? Research indicates, for retirees, becoming a landlord can be a lucrative supplement to social security and planned retirement savings. Sources say property in the right location can provide investors between $200-$1,000 income per month after expenses.

Think you can’t afford a second home? One of the key advantages to owning rental property is that, ideally, the rent should more than cover the cost of the mortgage and taxes. You build equity in the property and have extra cash for your own current living expenses.

Aside from the monthly income, there are several positive aspects to owning rental property, including:

  • Rents can be increased relative to inflation, which means increasing income over time.
  • Asset valuation tends to increase with years of ownership.
  • Depreciation allows for tax advantages providing tax-deferred cash flow.
  • Mortgage cost is typically at a fixed amount resulting in a somewhat fixed and dependable income.

While property ownership can provide a level of income security, there are possible disadvantages to rental property ownership:

  • Responsibility for upkeep and related expenses rests with the owner
  • Undependable tenants can result in gaps in income
  • There’s an assumed risk of empty units.
  • Real estate is a non-liquid asset.
  • Building a feasible retirement income stream takes time.

Another concern with investing in rental properties is whether to hire a property management company or assume the position of landlord. Doing the latter may require middle of the night calls to fix a broken heating system or frozen pipes, etc. While not necessarily difficult, the role may become inconvenient and cumbersome. However, using a property manager involves a major cost that takes away you’re your profit.

So how does one get started as a rental property owner? Experts recommend investing in single-family homes located in good school districts. These are the most sought after properties by tenants with young families. It’s also beneficial to secure properties large enough to accommodate any needed additions or renovations. Other helpful hints are:

  • Be prepared to buy and hold onto the property for the greatest return on investment.
  • Have a cash reserve equal to six months expenses to cover periods of non-rentals.
  • Buy property in close proximity to your residence for ease of oversight.
  • Do your homework before purchasing — consult a home inspector, tax advisor and real estate agent for information about the surrounding properties.

While there are many considerations when deciding whether or not real estate investment is a realistic supplement for your retirement income, if done thoughtfully, it can be profitable. Although it takes upfront time and money, the payoff is long-term stable income.

Call the Law Office of Joel R. Spivack, Esq. today with any questions about buying or selling real estate in South Jersey.

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Attorney Joel R. Spivack is an experienced bankruptcy and residential real estate transactions lawyer in Cherry Hill, New Jersey. Clients come to us for legal services, but what we really provide is peace of mind. For more than 30 years, Attorney Spivack has helped people make wise, informed decisions about bankruptcy filings, debt relief options and residential real estate transactions.
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