Figuring out how to retire can be all-consuming. Many people look at their 401k and social security as enough to be able to retire. Others, however, recognize that this may not be enough. Investing in your retirement is a great way to give yourself a bigger cushion and income. One of the best ways to invest is through owning property. Running a rental property pays for itself. You make money to pay the mortgage and operating costs from the home. This can also give you income to help you retire comfortably. The question, then, is what would it take to make owning rental properties your retirement plan? How many rentals needed to retire comfortably?
Defining “Retire Comfortably”
One person sees retiring comfortably as being able to spoil their grandkids and not worry about their bills. Others want a growing nest egg in case of emergency. There is also a segment of retirees who wish to travel and spend their money on recreational activities. None of these are better than the next. Instead, they show there is a range of ways to retire comfortably. Because of this, different people will have different needs when it comes to their property rentals.
However, it’s essential to set a standard here. So, to retire comfortably means never to live wanting anything. If you want to go out to eat, you can afford it. If you want to take a trip, you can take it. Now, that doesn’t mean living a life of excess or luxury. It simply means you don’t have to pinch pennies to do the things you want.
How Does Owning Rental Property Work?
When you own a property that you want to rent out, there are two basic ways to do it. First, you can run the property yourself. This involves much work and is generally not what a retiree wants to do. After all, this is an investment to live comfortably. It’s not a new job. The second and better option for retirees is to hire a property management company to run the property. Property rental companies will manage the property for you, helping to turn your rental property into passive income.
You will also need to decide what type of renters you want. Remember, if you buy something near the ocean, it may be more valuable as a rental than a long-term home. There are other neighborhoods where tourists don’t stay, like suburbs, but make great spots for family rentals. So, be aware of where you’re buying property to rent, as it impacts how you rent.
There are also different regulations and laws surrounding property ownership and renter’s rights, depending on where you live. However, property management companies are experts in these laws and can help you understand them.
What Rental Strategies Can You Employ?
There are many roads to the same place. This is true for accomplishing anything in life, including making money from property rentals. But, the truth is that there is no one way to get too comfortable. So, what are some common ways to operate your rentals?
- A Few Luxury Rental Properties. Finding one or two high-end rental properties is a great way to make money for retirement. While there is a high initial investment to be made here, they will make money back quickly. You have to maintain that high standard.
- Several Inexpensive Rentals. Cheaper rental properties are about the volume that comes with them. These tend to be more hands-off, cost less, and earn less income for you. So, you invest in more to make up the difference.
In all of this, there is a second decision to make. Are you renting to vacationers or residents? With these two options come different challenges. You can charge more, generally, for a vacation rental property. However, people tend to treat rental properties poorly, and income is inconsistent. Properties in popular vacation spots also tend to be a more significant initial investment. On the other hand, a long-term resident offers a reliable income source, and they’re more likely to treat the property well. However, this income isn’t going to be as high as a successful vacation rental property.
How Many Rentals Needed to Retire?
The answer to how many rental properties you’ll need to retire comfortably comes down to several factors. What does your mortgage look like? Is there a strong tourist economy? However, it’s safe to say that if you’re renting something generally seen as high-end, you should be okay with two or three properties. Lower-end housing is going to have smaller margins, so you’ll need to cast a wider net. A half dozen or so properties are a safe bet.
In general, though, the better the housing market, the fewer homes you’ll need. This is because a reasonable mortgage rate, and much interest, will drive up your margins. So, you need fewer properties.
The Bottom Line
The bottom line is that the number of rentals needed to retire is dependent on how you want to retire. If you’re going to travel, you may need to earn more money. But, on the other hand, they can get away with fewer or cheaper properties for someone who wants to live simply. So, decide for yourself what comfort means to you, and go from there.
For more information, contact Dwellings Property Management today. They will be able to tell you about all of their extensive offerings that you can take advantage of.