Rental income
Let’s start with rental income. There are upsides and downsides to this form of investing. It can be quite lucrative, but you will need to be willing to spend some time doing maintenance on the house, or finding someone who can. If you are able to pay off a house entirely, you can then enjoy collecting the rent as nearly pure profit. If, however, the house still carries a mortgage, you will need to find enough renters or charge enough in rent to both pay for your mortgage as well as give you some additional income.
If your house or apartment unit is located in the right area, you can start to realize as much as $1,000 a month or more after your mortgage and other expenses are paid. Realistically, however, you can expect to receive about $200 a month. Should you luck out and have tenants all the time or a long term tenant, that can be income every month you can count on. Tuck that money away in an investment account and let it earn interest and it can do even more work for you.
On the off chance that you didn’t set aside enough for retirement, or you did and lost it all in the recession, rental income can give you a supplemental income every month that helps take the stress out of retirement.
Rental properties also carry certain tax benefits as well, since you can take depreciation costs as a tax deduction. Wouldn’t it be nice to receive a large refund at the end of the tax year that you can put away for retirement?
Flipping properties
Another way you can make money in the real estate market to use for retirement income is to buy a house, fix it up, and sell it for a profit. Flipping houses is an art, and it takes some skill and practice to find just the right house, employ the right contractor, and sell the house to the right person.
Flipping houses also means you will need to have some cash to start with that you are willing to use as your down payment. You will not have access to the money in the house for some time, so it is not a liquid asset like an IRA or a certificate of deposit is.
That said, if you can pick a charming older home in reasonably good condition that just needs some cosmetic improvements to update it, you’ll be in good shape. It helps if you can locate the parts of town that are on the rise. Sites like Zillow or Trulia have a ton of information on them that will help you with finding areas where the home prices are on the rise, and they will tell you what a similar house has sold for recently.
Investing in real estate can be one component of your retirement plan, or your only one. Only you know your risk level and the amount of money that you can use to finance real estate with, as well as how much you will need for retirement. Good luck, and make sure you have some fun along the way!
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Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses from 2007 up to the present of experience in real estate investing and property management in the Memphis and Nashville markets.
