Could Property Rental Be Your Retirement Money Maker?
Everyone needs to think about how they’re going to get along once they retire. Some people don’t give it much thought, preferring to rely on their pension for any income. But other people are determined to be as financially secure as possible once they’ve retired. To achieve this goal, you need to start thinking about retirement long before you reach retirement age. The earlier you start putting money away, the less you’ll have to save each month and year. Start saving £200 a month 20 years before you retire, and you’ll be able to put aside £48,000, before taking any interest or investments into account.
However, you can also continue to earn money during retirement. One of the things many people consider to contribute towards their retirement funds is renting out property. You can begin managing some property before your retirement and continue after. Or you can wait until retirement to start. To help you decide whether managing property is for you, here are some things to consider.
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There are many ways you could find the funds to purchase rental property. Some people choose to move out of their houses when they retire so they can rent somewhere small and benefit from the rental income of the house. Other people use a buy-to-rent mortgage, which you can apply for if you already own your house. Another option is using savings that you already have to purchase property as a long-term investment. If you have a second home or holiday home, you can also rent those out to holidaymakers and locals.
As a landlord, you will have certain responsibilities in accordance with the law. These include making sure the property and everything in it are safe and arranging maintenance for any issues that arise. You can handle all of the property management yourself, but if you have several properties, many people find that it can be very time-consuming. If it’s too much for you, you can use America’s Best Property Management or another property management service. Although paying them will be an extra expense, it relieves you of the hassle of dealing with your tenants.
Before you jump into buying any property, it’s important that you do your research. You don’t want to make an investment, only to find that you’re not going to be making much money. Look at different areas, both close to you and farther away. You don’t have to invest in property just down the road; you could even make an investment on property abroad. You can calculate the capitalization rate of the property to give you an idea of whether it’s a good investment. Divide the expected annual rental income by the purchase price to find the capitalization rate. A higher rate could mean higher potential returns but could also mean a greater risk.
Becoming a landlord could be a source of steady income before or during your retirement. But you must weigh up the revenue with the costs of managing the property.