Monday, November 9, 2015

Make Sure Your Rental Investment Helps You Retire Sooner

Your retirement portfolio, boosted by rental properties, can add a steady stream of income throughout your retired life.  Of course, you will want to be certain those same properties don't become a drain on your personal retirement resources.  The following points may help make your investment work to your advantage.

1. Know your Financing Options
Lending requirements have changed from what they were in the past.  Down payments up to 30%, not including closing costs, may be necessary. Loan terms may be more favorable when purchasing a home you plan to occupy. You might choose to buy a home as an owner occupied property to live in for a year prior to renting out.  This would allow you to qualify for the more favorable terms offered owner occupied properties.  You might choose to use a portfolio lender who doesn't sell mortgages into the secondary market, meaning it the loan wouldn't need to meet Fannie Mae or Freddie Mac's terms. Consider buying foreclosures or homes through tax sales.

2. Set Aside Money in Reserves
At the most unexpected times, repair costs can creep up if you own a home. It is essential to have money in reserve before buying or renting out a property.  When the water heater blows or roof leaks, you will need the money readily available to fix or replace the problems. It is recommended to have at least six month's worth of rental expenses set aside to ensure you can take care of emergencies as they arise.

3. Understand Tax Implications
Depreciation on rental properties can be claimed offering a valuable tax benefit and reducing annual tax burdens. In several cases, rental units operate at a tax loss. These losses can be deducted on landlord's tax returns at a price of up to $25,000 per year.  Some other requirements need to be met but while tax implications can be complex, they can also be beneficial for owners of rental properties.

4. Use a Licensed, Knowledgeable Realtor to Help Choose the Right Properties
Be sure to purchase the right homes and condos if you choose to make rental income part of your retirement plan. Properties can be profitable investments if they are in the right school districts and attract quality tenants. Always consult an experienced Realtor when shopping for a rental.  They can point out how much homes are renting for in certain areas, high demand parts of town, and how to find rentals that will generate positive cash flow.  Typically single family homes in solid school districts are a wise focus for first-time landlords.  This is because families with children may be less likely to break a lease unexpectedly.

Rental properties can be terrific additions to retirement portfolios if chosen correctly. I would be happy to help you find a rental investment that just might help you retire early!  Call me directly at 727-565-1658 or check out my website at

Information from the Dough Roller