The 19 Sources of Retirement Income: Real Estate Rental Income
Welcome to the Wealth under Pressure Podcast, in which John Smallwood, a certified financial planner, identifies key areas of pressure on your wealth and strategizes with you to reduce it.
In this episode, John continues his series on the 19 Sources of Retirement Income, discussing the benefits of real estate rental income, and if you decide to include it, how it should work in your retirement plan.
John is the author of 5 Ways Your Wealth is Under Attack and It’s Your Wealth – Keep It.” He has lectured extensively on financial planning and is a recipient of the Five StarSM Wealth Manager Award.
Don’t miss John’s takeaways:
- One of the most important aspects of owning a property such as a small business, a gas station, or an apartment building is the income you can obtain from it.
- The rental rate you set is derived from the quality of the property and its location, as well as market rates.
- For most markets, that rental rate will rise over time.
- The tax benefits on that rental income are real:
- The 2017 tax law allows you to use the Qualified Business Income (QBI) tax deduction on your rental income—that’s a deduction of up to 20%.
- Different parts of the property (think windows, roofs, driveways) can be depreciated over time, accelerating their tax benefits.
- When you own rental income, you need to do all of the math to make sure that it is truly income-producing:
- The gross rents must exceed expenditures in real estate taxes, maintenance, utilities, legal fees, management company fees, and so on.
- The income should be greater than what you could make investing in the same asset class in a publicly traded market.
- You can use that rental income to do other things in your financial plan. For example, you can buy additional properties or pay down debt.
- When you do buy a rental property, make sure it does three things:
- Generate income
- Generate tax benefits
- and generate appreciation
Owning rental property in retirement is not for everyone, but it may be just right for you.
For more, listen above. Then visit us at smallwoodassociates.com. Download our 19 Sources of Retirement Income and find out more.
If you are new to Smallwood Wealth schedule a Wealth Curve Conversation here.
You can also connect with us on social media, or call us at (800) 797-1000. Set up a free, no-obligation 30-minute phone call. An advisor will discuss with you rental income, its benefits, and how it should work in your retirement plan.
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