The following is a guest post from Michael Clark and Property Turkey.
Is it worth considering a rental property to generate retirement income? There are many reasons why you may not have enough in your retirement pot to secure the retirement income you either desire or need. Usually this is a result of unforeseen and uncontrollable circumstances. There are methods of increasing your retirement pot but this can be a difficult process. Instead, it is worth considering purchasing a property which can be rented to create an income for the rest of your life.
In fact, a rental property can actually other significant advantages over traditional investment opportunities, buying as the property market dips will allow you to sweep up a good deal and quickly build equity as well as generating an income. However, before you invest you should consider the following points:
Funds – The first thing you will need is adequate funds. Using the traditional mortgage method will mean you need approximately a thirty percent deposit. If you do not have these funds available then it is possible to release funds from one of your retirement pots. The size of your deposit and your income will control the value of the house you can purchase. You should also consider having funds available for maintenance and emergency repairs.
Location – This is very important. The best rental properties are those which will be attractive to families. This means three or four bedroom houses within easy reach of a variety of amenities. Any location can work provided you pay the right price for the property and know the market you need to attract.
Earnings – To make a property investment worthwhile you will need to calculate all expenses involved in the maintenance of your purchase. This should include regular maintenance and management fees. The income you receive, less these expenses should leave you a return of at least eight percent. This will ensure your investment is worthwhile.
Issues – Tenants who fall behind on the rent or simply do not wish to pay can add significant, unexpected costs to your expenses. There can also be emergency issues such as boiler failures or additional inspections. Ongoing work can be either costly or time consuming and you must be prepared for this. There may also be a range of improvements and safety issues which need to be instigated once you have bought the property butbefore you can rent it. These costs can quickly add up although they can be reduced by doing as much of the work as possible yourself.
Tenant Selection – Choosing the right tenant will make a huge difference to the successfulness of your investment property. There are a variety of checks which can help to establish the suitability if a tenant. These include whether they are employed, are in a relationship and if they have good references or not. The more checks you can make the more likely it is thatyou will have a good, long term tenant. The best tenants are those who pay their rent on time and stay long term.
Assistance – There are a variety of people who can help you find and purchase the right property. Perhaps the most important one of these is the real estate agent; they should know the best areas, when a price is right and the type of tenant a property is likely to attract. A financial advisor can also be of valuable assistance to ensure you organize your finances properly and can borrow the amount of funds necessary to both purchase and maintain your investment property or properties.
Taxes – An investment income property can provide a variety of ways to reduce your tax bill. There are also plenty of options which can help you save money on your investment. It is advisable to consult a tax advisor to ensure you maximize the benefits of your income property and earns yourself the retirement you deserve.Believe it or not, income property has the potential of being an important bridge to your retirement. However, it is important to make sensible decisions if you want to see any returns. Ask for guidance if you can’t make a decision, choose your property and tenants wisely, and you have the highest chances of witnessing reasonable returns.