Fund Your Retirement with Rental Income
Investing in a rental property can be a low-risk, high-reward way to secure income for your golden years. It seems simple enough: purchase a property, rent it out, collect income—but every investment strategy has its pros and cons. If you’re considering jumping on the property bandwagon to fund your retirement, here’s what you should know first:
Pros of Owning an Income Property:
- Generates monthly income
- Tax advantages
- Can earn more each year by raising rent
The first advantage of owning an income property is implied in the name: it generates income for you on a monthly basis. Anything left after expenses goes into your pocket every month. Depending on the rental value of your property and how many units you own, this could be hundreds or even thousands of dollars of additional income each month. As you pay down the mortgage, the money in your pocket only increases each month.
This additional income can be used to fund your retirement, or it can be used for anything you choose: paying for children’s education, buying a boat, vacations, or reinvesting in other property.
Aside from the fact that it can generate additional income for you each month, one of the other advantageous aspects of owning property for rental purposes is that you can increase the rental fees each year. So even if it’s generating a smaller amount that you anticipated at the beginning, it can grow each and every year to keep pace with or exceed cost of living increases.
When it comes to taxes, you can deduct most of the expenses associated with your rental property from the income you generate, lowering the amount of tax you’ll have to pay.
Cons of Owning an Income Property:
- Finding Tenants and Stable income
- Expense and Repairs
- Non-Liquid Asset
Of course, every investment has its downside. For properties, the most obvious is that they are expensive, not only to purchase, but to maintain as well. It’s not always easy to scrape together enough for a down payment, never mind the higher down payment requirements that come with owning an investment property. Generally speaking, lenders in Canada require investors to front a minimum 20% down payment for non-owner occupied investment properties.
If you live in an area where finding reliable, stable tenants is difficult, it can cause your plan to fail, drastically. Any vacancies cause lost income, and undesirable tenants can cause higher maintenance expenses.
Make the most of your investment property by working with a Toronto property management company. From choosing the right property to finding the right tenants to conducting routine maintenance, Simplified Rentals will handle each and every step of the way in order to ensure your retirement is well funded and set for smooth sailing.