Rental Property as a Retirement Investment

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Commercialor residential rental property is a very questionable retirement investment.Even though rental units can generate additional income they can also generateadditional expenses and subject retirees to an increased level of risk. Thereare other ways of using your nest egg that are less costly and more secure.


PotentialCosts of Rental Property

The biggestproblem with rental property is the potential costs associated with it.Something many people forget is that you still have to pay taxes, insurancepremiums, utility bills and maintenance costs on a unit that is not rented. Ifthe unit sits empty for several months you could be out several hundred or evenseveral thousand dollars.


If you arefinancing the property through a mortgage you will still have to pay themortgage payments if the unit is not rented. That means you will be payinginterest even if no income is coming in. Another expense many people forgetabout is legal bills. Most landlords find themselves in court or a major legaldispute sooner or later and end up paying a lawyer to represent them. This canobviously cost a small fortune.


So it isobvious that a rental unit can quickly turn from a cash cow into a liability.The more you invest in a rental the more you will be likely to lose on it. Therisk of loss is simply too high for a retired person or couple that is tryingto live on a limited income.


Timeand Hassle Associated with a Rental Unit

Even if youare able to handle the potential financial losses there is all the time andeffort involved in renting a house or shop. If you manage it yourself you willhave to collect the rents, enforce the rules, screen tenants and oversee theproperty. You will be responsible for maintenance and repairs as well as the bills.


Nobody likesthe idea of getting up in the middle of the night to deal with a leaky roof ora clogged toilet. That is exactly what can happen. You may also have to repair,maintain and clean the unit or its yard. Would you really want to spend your retirementpainting, mopping, performing miner repairs or mowing a yard? You could hire amaintenance or management company but that is an added expense.


Finallyevery landlord has to be prepared to confront tenants sooner or later. He orshe has to be ready to enforce the rules and even evict tenants. Could youhandle that? Not everybody can but a landlord has to be ready to handle thoseunpleasant chores.


IncreasedResponsibility and Liability

Somethingmany people forget about rental ownership is the increased responsibility andliability it creates for you. If you rent out a house you could be sued if avisitor to that home tripped and fell and blamed you. You could also be liableif the house burned down and destroyed your tenant’s property.


Landlordsalso have to follow all the local laws associated with rentals. This includesrent control, civil rights statutes and much more. In some areas you cannotraise the rent without a vote of the city council. In others there can berestrictions on who you rent to or when.


Alternativesto Rental Property

It isobvious that rental property is simply too costly and risky for average peopleto rely upon for retire income. Therefore you need to look into alternativessuch as annuities. An annuity provides a regular stream of income with no cost,legal obligations, hassle or added risk. There are even lifetime annuities thatcan provide income until a person dies. The truth is that many sources ofretirement income that you can take advantage of that won’t involve getting upat midnight to unclog atoilet.

7 thoughts on “Rental Property as a Retirement Investment”

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