Many people think that retirement plans are one-time payouts at the end of a long career. What they don’t realize is that retirement should be a strategy that supplies you with a stable income stream without needing employment.
One of the best retirement strategies is to earn income from real estate investments. Retiring on real estate means building a portfolio of rental properties that cover your daily expenses as well as gives you discretionary income.
Investing in real estate has many advantages. Unlike owning a retail store or restaurant, it needs little day-to-day involvement in operations and maintenance. The market is also relatively stable compared to stocks or currencies.
When it comes to retirement, recurring income should dominate your portfolio. Rental properties can fetch yields on investment that outpace inflation and short-term deposits. Buying and selling properties can definitely be a lucrative venture, however, maintaining steady cash flow is the objective of retirement planning. With the right mix of investments, it is possible to retire with passive income from real estate.
Here’s a step-by-step guide on how to generate a retirement plan from real estate income:
Review your current expenses
Before you can retire, you will need to know how much money you will need to cover your basic expenses. Take into account your current taxes, mortgage payments, utilities, insurance plans, and grocery expenses, among other things. You should then add the amount of discretionary spending you do. These include vacations, non-essential shopping, and money that you spend on your hobbies and interests. When you have taken stock of all of your actual cost of living, you will know how much money you will need to earn from your real estate investments in order to safely retire.
Look for the right investment property
You will need to identify a property in a location that will be attractive to renters. A building without tenants will not provide you the income you need. To test the market, you can search online or consult a property management company for properties that are in high demand and which areas renters usually gravitate towards. Consider accessibility to transportation, proximity to schools or hospitals, and if there are conveniences like groceries or restaurants nearby. Ask yourself what considerations you would make as a renter, and look for the right property based on that criteria.
When you’ve found the right property, it is important to get the best interest rates for your mortgage so you can keep your costs low. Timing can be a factor when applying for a mortgage, so make sure you check the market for the lowest interest rates and payment terms. Your mortgage should be within or less the amount of total income you will receive from rental, so that your investment can pay for itself, with cash to spare.
Re-invest your money
Once you’ve made your first or second investments, the profits from it can be reinvested in a new property. This way, you can grow your income exponentially. You should continuously reinvest until you reach a level of income that makes you feel comfortable enough to leave your day job.
Hire a property manager
If you have multi-unit properties or houses in several locations, it would be wise to seek the services of a professional property management company. They can be the ones to look for tenants for you, as well as address concerns of your lessees like maintenance and repairs. This will save you precious time and allow you to enjoy your retirement spending your hard-earned money.
Early retirement is possible with a well-managed real estate portfolio. Many people don’t realize you don’t need to wait until your sixties if you make the right investments. With carefully chosen properties and the right service partner to do the legwork, the only thing you’ll need to worry about is waiting for rental collections each month.
Are you looking for a property management company in Indianapolis? We provide leasing and management services so you don’t need to worry about your portfolio. Contact us today and see how we can help you!