After retiring, there are many different ways to invest money. No person should place all of their funds into one area. It is important to stay diversified in your investments, but some investments have better returns than others. The stock market's S&P 500 has an average return rate of 9.5% per year. For those who are already invested in the stock market, or don't want to be a part of it, there are investment options which provide even higher returns on average. Within diversified real estate investments, the average rate of return is 10.6% per year. An investment property can be quite successful, but there are specific items to look for when considering investing in an estate.
One of the first essential items to consider when looking at an investment property is the property tax. After retiring, you want to minimize your expenses, especially expenses in taxes. Even is a building or home is in excellent condition and is reasonably priced, taxes can cause it to be a poor investment. Taxes will take away from your monthly profits, so make sure to compare different property tax rates.
The location of the property will have a significant role in its success. There are certain areas and neighborhoods which are more likely to have people rent in. An example of this would be housing located near colleges. While college renters are somewhat high risk, you can trust that your property will be in high demand if near an area that has people that need housing. Additionally, if you are retired, you want the location to be easily accessible for when you want to visit the property, so proximity to where you reside is important as well.
Most investment properties will require a minimum of a 20% down payment, so make sure that the properties you are considering are within your budget. Additionally, the more you can put on your initial down payment may help you to get a better rate on your loan.
The Condition of the Property
Some properties are in excellent condition and others that could be labeled as a fixer-upper. When considering purchasing a place that needs a lot of work done, make sure you have it properly inspected, and that you can have the issues fixed reasonably quickly. After retiring, you don't want to spend all of your spare time fixing a property.
Rate of Return
When considering investing in any property, you need to know how quickly you can make back your investment. For example, if you are going to be renting your property, you should be able to make roughly 1% back each month on your investment. It is important to make the investment back as quickly as possible because your income is limited after retirement.
Investing in property can be quite lucrative and a great way to help fund your retirement — if you do it correctly. Before investing, there are many different factors that you should consider. Those factors include property taxes, location, down payment, the condition of the property, and the rate of return.