Yahoo Finance 6 Ways to Increase Your Retirement Rental Income
A number of the best places in the world to retire are a bargain right now, due to local market factors as well as the strength of the U.S. dollar. If one of these retirement spots appeals to you, this is a window of opportunity to invest in retirement digs of your own at a discount, even if your retirement is years away.
If you buy an apartment or house in the country where you intend to live in retirement, you can take advantage of your current buying power while controlling what is usually the biggest part of any retirement budget: housing.
In the short term, your eventual retirement home can be rented out to generate income to help cover associated carrying expenses and maybe even to supplement your retirement nest egg. If your intention is to rent your overseas property until you're ready to use it yourself, it's important to remember that agenda when making your purchase decision. You want to give yourself every possible advantage as a landlord. Even in a good market, good returns are not a given. The best returns are the result of a little extra effort to give yourself an advantage over other rental properties.
Here are six important factors affecting your rental income:
1. Your intended renter. Rentals that target a specific clientele outperform those that don't. If your target destination is a city, a long-term business traveler or executive can be an ideal tenant. If this is a market you decide you want to try to attract, then focus your property search in areas or neighborhoods where business travelers want to be. Then, after you've made your purchase, outfit the property to suit business travelers with quality furnishings and services, including a desk, work space, printer and fast Internet.
Another potential renter is the tourist traveler. This is the market to target in a coastal destination such as Puerto Vallarta, Mexico, or Coronado, Panama. In Cuenca, Ecuador, an active and growing rental market, the target tenant is an expat retiree. Each market has its own niche.
2. The location. It's cliché, but it's true. Location matters most in a rental property. If you botch this, nothing else matters.
The right location depends on knowing your client. Start by targeting the region your intended client wants to be. Then fine tune your search based on your target tenant's interests.
For example, in Medellín, Colombia, an appealing retirement haven that's also an active and growing rental market, the ideal location is within walking distance of both Parque Lleras and the Golden Mile, the two neighborhoods in this city most sought after by both tourists and business travelers. An apartment in proximity to these two zones would also be within walking distance of supermarkets, dozens of restaurants, cafes, shopping and gyms. It's possible to keep an apartment in this area rented nearly 100 percent of the time.
3. The size of the property. When buying a place that will be both your eventual retirement home and a rental in the meantime, you have to balance how much space you want versus the ideal size of a rental in that market. It's easy to confuse the ideal second home with the ideal rental property. For rentals, smaller is generally better, with renters usually preferring one or two bedrooms. This keeps the purchase outlay low and helps to increase the return.
4. The rental and property managers. A good property manager makes the difference between a hassle-free income and a stressful nightmare. Even with an ideal property, the property manager makes the difference between a good performer and a money pit.
In some markets, rental and property management services are offered by the same person or group. In others, you will have to employ two different people: a rental manager to find renters for you and a property manager to pay your local bills and manage property repairs and maintenance.
5. The furnishings. Furnish your property depending on your target market, understanding that anything you put into a rental property could be broken or stolen by a tenant. In other words, don't invest in antiques or original artwork. Generally, when furnishing a rental, less is more. You want to convey an uncrowded, neat, spacious and up-to-date look. Don't go overboard hanging things on the walls and avoid knick-knacks and other clutter.
6. Website photos. No matter how nice your property is or how well furnished, it's no better than how it looks on the rental manager's website. Most renters choose a property based on the website photos. If your pictures don't sell the place, it won't get booked. That's why it can be worth investing in professional photography, preferably taken by someone with real estate photography experience. You could take photographs yourself, but unless you're a professional photographer, they won't do what you want them to do.
Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group.
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