With the thought of not having enough for a comfortable retirement preoccupying the minds of millions of Americans, many are thinking about how they can make the most of their investments and retirement savings. While seniors can invest in 401(k) retirement funds that feature employer-matched contributions or put money toward stocks and bonds, they may be missing a key opportunity for a steady stream of income well into their golden years: rental properties.
To ensure they have enough money for their entire lives, retirees should plan to have multiple sources of income to fund their retirement, according to Entrepreneur Magazine. In addition to traditional sources like Social Security benefits and employer-provided retirement plans, retirees can greatly benefit from investments like rental properties to generate passive income.
Because stable income is an important part of retirement to account for monthly expenses, such as utility bills, health care costs and more, knowing you have money coming in each month can help generate peace of mind for retirees who are hoping to enjoy their years out of the workforce.
A good retirement property can help provide retirees with hundreds – or even thousands for certain properties – of dollars of income each month. Since the value of property will go up in areas with high demand, retirees can look forward to increasing rental rates over time. Areas that appeal to tenants may also see higher resale value for rental properties, which can provide an exit strategy for investors should they want or need one.
The best areas to enter the rental market
However, retirees might ask themselves which areas are actually good investments. Before deciding to invest in a property, such as a single-family home, you should consider key features that will determine the property’s value and potential earnings. Job growth in an area will likely spur demand for housing and lead to rising rental income.
In 2014 and next year, metropolitan areas that are likely to see greater demand for rentals include the Dallas-Fort Worth area because of the affordability of the region, making it easier to enter the rental market, according to Bloomberg Businessweek. Dallas investment properties have high resale value and require less investment to produce desired rental income. Investors could also consider Ohio-based metropolitan areas like Cincinnati and Columbus, as well as Houston and Detroit.
With retirees figuring out how to best spend their retirement savings, investing in rental properties can help generate a steady source of income throughout their lives and the life of the investment.