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Is real estate investment a good passive income source for retirees?

DFY Real Estate

Are you a retiree looking for a way to make a passive income? If so, you may have considered investing in real estate. But is real estate really a good source of passive income? Keep reading to find out what some experts have to say on the matter. Enjoying your golden years with a little extra money may be easier than you realize.

Rinal Patel

Rinal Patel, Co-Founder & Licensed Realtor of We Buy Philly Home

Income Without Long Hours

Real estate investment can be an excellent passive income source for retirees. With a little research and planning, retirees can generate reliable monthly income from their rental properties without putting in long work hours.

Real estate also offers the potential for significant capital appreciation over the long term, which can provide retirees with a nest egg to supplement their retirement income. Another great thing about investing in real estate is that it can be relatively low-maintenance.

While it is still important to screen tenants and keep up with maintenance and repairs, retirees can often hire property management companies to handle much of the day-to-day work involved in being a landlord. This can give retirees the peace of mind of knowing that their investment is in good hands while still providing them with a healthy return.

Of course, as with any investment, there are risks involved in investing in rental properties. The most common risk is the possibility of tenant turnover, which can lead to vacancies and lost income.

Another risk is the potential for repairs and maintenance issues, which can also eat into profits. However, these risks can be mitigated by diversifying one’s portfolio across multiple properties and being selective about the properties [in which one chooses] to invest.

High Return Investment

1. Real Estate Returns Adjusted With Inflation

Landlords can raise the rent each year to keep pace with inflation. Your monthly mortgage payment would be the same even if you raise the rent.

For example, suppose you have bought a property, given it in rent for $1000, and financed it with a $500-monthly mortgage. If you raise your rent by 4%, or $40, each year, the gap between the rent and your mortgage goes up by 6%. The gap keeps growing as time passes by.

If you compare it with bonds, bond investors have to subtract inflation to calculate the “actual” return. If the bond pays 3% interest for a year, but the inflation grows at 1% that year, the actual return would only be 2%. This is why real estate is much better as an investment compared to other options that do not adjust with inflation.

2. Predictability Of Returns

You can’t predict the performance of a stock or mutual fund. You can research the company or fund manager and hope your investment performs well as you move forward.

With real estate investments, you can predict the returns with precision. You know the purchase price, and you can [see] the market rent through market research tools like Zillow or Rentometer. It helps you to forecast your income and expenses precisely.

If you dive deeper into the expenses, you know the property tax rates, insurance costs, and property management fees. You can also find out your neighborhood’s vacancy rate from other landlords and property managers operating in the same neighborhood. All this readily available information makes it easy to predict your returns.

Gunner Davis

Gunner Davis, Realtor and Team Lead at Coldwell Banker Realty

Jason Gelios

Jason Gelios from Its All About The Real Estate

A More Reliable Investment

Retirees can invest in income properties to drum up monthly passive income. [That is if] they can put in the upfront work it takes to get to that point or write the checks to have professionals do so.

Compared to many other investment vehicles, real estate is more stable, reliable, and easy to predict, often with a higher rate of return. You don’t get that kind of reassurance investing in the stock market.

Retirees can take advantage of owning rental homes that provide a monthly income while hiring a property manager to manage the property or properties.

A Source Of Income With Less Hassle

A real estate investment is a great passive income source for retirees. It is a less hassle source of income, perfect for retirees who are old. They do not have to do heavy workloads to earn income constantly. They could enjoy traveling and doing anything they want while earning money from their investment.

It is also a good investment as its value appreciates. Land and houses increase their worth as time goes by. They do not have to worry about earning low as real estate investments do not depreciate over time.

Robin Suh

Robin Suh, CEO of The Net Lender

This is a crowdsourced article. Contributors' statements do not necessarily reflect the opinion of this website, other people, businesses, or other contributors.

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