If you're nearing retirement, you're probably well aware that you can't plan to live on Social Security alone. Those benefits pay the typical senior today around $1,500 a month, or $18,000 a year, which hardly makes for a comfortable lifestyle, even if you're the frugal type. Rather, you'll need additional income sources, and those might include a 401k or IRA, stocks, bonds, and real estate.
Many seniors who invest in real estate take a hands-off approach, opting for real estate investment trusts (REITs) over physical properties. But actually, owning an income property during retirement is a great way to boost your income, all the while growing your equity in a home that you may eventually manage to sell at a profit.
But if you're going to buy an income property as a retiree, you'll need to land on the right one. As such, be sure to keep these things in mind when you embark on your search.
If you're going to buy an investment property, your goal should be to purchase one in a strong housing market -- specifically, a strong rental market. You may want to favor areas where jobs are abundant, schools are highly rated, or colleges are located, as that could increase your chances of securing a steady stream of tenants.
But also, consider your income property's proximity to where you live. If you're planning to be a hands-on landlord, the last thing you'll want is to have to drive for two hours every time an issue with your rental arises. And remember, emergencies can happen at night, and seniors don't always do so well driving in the dark, so for that reason alone, you may want to choose a rental property that's closer to the place you call home.
Every home requires ongoing maintenance, but the question is: How much of that maintenance will you be physically capable of doing yourself?
It's not a secret that seniors are more likely to struggle with mobility issues than younger folks, so before you buy a 2,500-square-foot home with a long driveway and expansive yard, think about the work that will entail and whether you're up for it. Of course, there's always the option to hire a property manager for your rental home and outsource its upkeep, but doing so will eat into your profits.
The point of owning a rental property as a senior is to boost your retirement income, so the last thing you want is a constant influx of repairs on your hands. To that end, pay attention to not just the state of the home you're looking to buy but also its age. Though older homes don't always require more work, it stands to reason that a home that's 80 years old will have more issues than a home that's 15 years young. Think about your tolerance for repairs from a financial standpoint: How much do you really want to risk having to spend to keep that home in order?
That said, don't be fooled into thinking that a new-construction home is the best choice either. A lot of newer homes are made with inferior, builder-grade materials that could result in more repairs than you might anticipate.
Finding the right income property is key
As a senior, the last thing you need is the stress of vacancies, late-night repairs, excessive maintenance, and costly fixes. Vet your home options carefully before choosing an income property so you don't spend a chunk of your retirement bemoaning the decision to own one.
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