Monday, June 20, 2016

Real Estate Investing Progress

Part of my strategy for creating steady sources of income in retirement is to own rental property.  My goal is for rental income to cover 25% of our retirement income.   At this time, I have met that goal through a partnership interest in a industrial building that I inherited from my parents.   This investment has worked out well since the real estate has a property manager and requires no direct involvement from me.

Given the return of this property is 10%, I've been considering increasing our rental real estate holdings through buying 2-3 family homes for rent.   However, after a few months of searching, I have not found a property financially comparable to the property I already own.  The main reason is that most properties are priced to deliver at a low return of 4-6% that is only slightly higher than the return of some good dividend paying stocks.  Also,being the sole landlord would  require high involvement on my part.

 Low return and high involvement isn't what I want to sign up for in retirement.  Also, I recognize that, eventually, any individually owned property will need to be sold to access cash, which can also be challenging.

So for now, I plan to only buy a rental property if the return is high (greater than 8%) and if low involvement is required from me.   A pretty high bar, which very few properties will meet.  However, I plan to keep looking just in case one become available for purchase.

For more on Strategies and Plans, check back every Monday for a new segment.

This is not financial advice. Please consult a professional advisor.

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