After-The-Paycheck-logo

An informational & educational website that explores a wide range of topics aimed at helping people to and through their retirement.

Subscribe For Updates on New Posts & Episodes

Should You Keep That Rental Property In Retirement?

Any investment will always involve both time and money, and this is especially true for rental property owners. Think about all the factors that go into owning a rental property: buildings must be maintained, grounds must be monitored, fixtures and plumbing must be repaired, and insurance and taxes must be paid. The financial benefits of your rental property need to outweigh the effort you put into it in order to make the whole experience worth it.

If you are debating whether or not to keep your rental property, before making any decisions, ask yourself the following questions.

How Reliable Are Your Renters?

How your rental property is treated and maintained over time will determine how much work and maintenance expenses need to go into it. This is largely impacted by the people who occupy your home day in and day out. If your renters are prone to cleaning up after themselves and keeping your rental property well-kept, then the amount of property maintenance will be kept at a minimum. However, if you have renters who do not clean up after themselves or are at risk of causing major damage, then that will cost you a lot of time and money.

Look back at your last several renters and see if you can detect any patterns. Do you tend to attract reliable renters and the amount of work and maintenance for you has been a breeze? Or are you prone to finding renters who turn out to be disappointing in the end, and your wallet is proof of it?

What Is Your Real Return On Investment (ROI)?

Just because your renters cut you a check every month does not mean that every dollar you get goes straight into your bank account. There are expenses that come with property ownership, and it’s important to take them all into account so you can figure out what is your true ROI. Take your monthly rental income and subtract any maintenance or repair expenses, management company fees, and anything else that was spent on your property that month. The result is your true ROI for the month. Repeat this for the last 6 months to get an estimated monthly average. Once you have these numbers, you can determine whether or not you are making money, and if that amount is satisfactory for the amount of responsibility and time you put into it.

Do The Tax Benefits Still Make Sense? 

As a rental property owner, you have access to a set of unique tax benefits provided by the Internal Revenue Service (IRS). For instance, you have the opportunity to deduct your mortgage interest rate payments, your property tax insurance, advertising expenses to recruit tenants, and repair and maintenance expenses. There is even a special category called “depreciation” where rental property owners can deduct the estimated annual “wear and tear” of their property. In order to determine whether or not you should keep your rental property, calculate how much you save on taxes in addition to your monthly rental income after expenses. For instance, if you are in a higher tax bracket, then your rental property has the power to lower how much you’ll pay in taxes. However, if you cannot utilize many of the tax benefits and the numbers do not add up, then keeping your rental property may not make sense financially.

Go The Extra Mile

Your time and money are precious resources that should always be put to good use. If you find that your rental property is giving you a desired boost in income without impeding on your well-being, then you should definitely consider keeping the property. However, if your property isn’t yielding the results you would like and it’s causing you headaches, then it may be time to consider other options.

Remember that you don’t need to make this decision on your own. To help you feel secure in your choice, we would be more than happy to walk you through the different financial options regarding your rental property. Call us at (617) 630-8787 or click here to request your complimentary consultation.

Tags: Retirement Planning, Income Planning, taxes

Popular:

   ATP Video Series
Helpful Worksheets
  What We Do & How We Can Help
New call-to-action

Have a list of questions around your finances? Thinking about your retirement situation?

Let’s chat. Fill out the form below or request a time on our calendar to reserve a 15 min. phone call with either Sam, John, or Ryan - we'll use this time to get to know you and your needs and talk about the retirement planning obstacles you may be facing.