Are there ways to guarantee your real estate investment? You have heard it before but when it comes to real estate investments it’s worth repeating, “The only guarantees in life are death and taxes”. Having said that, you can take steps to mitigate your risk for any investment. You might be surprised by how many people enter into the marketplace and just shoot from the hip. Most are losers and some are winners in spite of themselves.
Rental Properties for Retirement Income
Investors that are looking to supplement their retirement income by purchasing a home for a rental investment can be very successful by using a simple business plan to evaluate a potential purchase for rental income. The investors we work with only purchase single family homes. The topic of investments can be broad so for the purpose of this discussion let’s talk single family homes.
Single family homes can be diverse in scope and from a tax standpoint it can help you with your net disposable income by purchasing homes at different times, analogous to laddering T-Bills or CD purchases.
Mitigate your risk and increase your probability for success in this business venture by creating a business model for the purchase of a home and include the following:
- What is my target price for homes I’ll place into my rental business?
- How many home will I need to create a comfortable retirement income?
- Will I manage these rental homes and if not what is the expense for a professional property manager?
- What features of a home make them popular for renters?
- Where are the most popular areas (geographic) that people want to live?
- What is the average rental percent of occupancy rates for homes in the area?
- What is the dollar range of a home that will give me the best Return on my Investment (ROI)?
- What kind of rent can be expected to help me calculate my ROI?
- Should I include all of the appliances or not?
- How much should be set aside for repairs and/or maintenance during and after a rental term
- What should I include as part of my rental terms in our agreement?
- What plans should I have in place if they default on our rental agreement?
- Should I include a Home Warranty plan as part of my overall cost?
- Should I give a discount if the renter agrees to EFT the rent every month?
The above is a summary of items that you need to address before you make that first purchase. Is there more you need to be aware of? You bet, but this will give you a start to begin your rental property rental properties for retirement income
While creating a personal business plan for yourself may take a little time it is well worth your effort as it will mitigate the risk of your purchase and enhance the probability of success for your business. The first two people you need to employ on your team is a REALTOR®, and your accountant. You’ll be building on your team as you move forward to enhance your business and ensure your success.
Article: Are There Ways to Guarantee Your Real Estate Investment?
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