While there are many benefits to owning rental property in Calvert County, Real Property Management answers the big question, “How can rental property income supplement retirement income in Southern Maryland?”
Many retirees have found that owning rental property can be an effective way of supplementing their retirement income.
First, let’s talk about the benefits of owning rental property in Calvert County:
Rental property income provides a steady and somewhat predictable source of monthly income.
Owning rental property allows you to take advantage of various tax benefits, such as the ability to deduct most operating and maintenance expenses, including mortgage interest expense. You can also depreciate the structure (not the land). If you later sell the property, you’ll have to recover that depreciation. However, if you own the property until you die, your heirs can take advantage of a step-up in basis of the property, so that depreciation goes away.
Your property will likely appreciate over time, depending on how long you own it. However, you shouldn’t count on that. The deal should make economic sense on its own – without considering appreciation. Appreciation is just the icing on the cake.
A fixed-rate mortgage can serve as an inflation hedge. As rents and maintenance expenses rise over time, your mortgage will not.
The following are some important considerations one should make before jumping into investment property ownership:
Planning is Key
First and foremost, plan ahead! The best time to begin investing in real estate is NOT when you’re in or near retirement. If you plan to mortgage your investment property, do so before you retire. Many lenders require applicants to have two years of steady employment in the same or similar occupation in order to qualify for a loan.
Who’s going to manage your property? Owning rental property may appear easy. After all, how difficult can it be to collect a rent check every month? But owning rental property can be much more time-consuming than it would appear at first blush. There is much to be done – finding and qualifying renters, signing the lease, maintaining the property, responding to problems, periodically inspecting the property, following up on delinquent rent, handling evictions, etc. And there are laws and regulations that property owners must comply with. You can either do it yourself or hire a professional property manager to handle everything for you. If you choose to hire a property manager, deal only with a reputable company with a proven track record.
Keeping your rental property leased can sometimes be challenging, particularly if the location or conditions are not ideal. Some experts suggest investors in income-producing property should keep at least six months’ worth of reserves on hand in the event the property remains vacant.
Remember to set aside money for repairs and maintenance. You have an obligation to maintain your rental property in habitable condition, so you won’t have the luxury of delaying necessary repairs and maintenance until you can save the money.
Owning rental property isn’t for everyone, but it can definitely work for your retirement if you plan and are prepared.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.