Is A Second Home Part Of Your Retirement Plan?

Retirement planning can be tricky. We usually tend to panic when it comes to retirement planning, unsure of where to invest our money, so we can maintain a decent lifestyle post-retirement too. There are hundreds of options, from retirement plans to investing in stocks or buying liquid assets that can be easily monetized.

Of all these multiple options, there is one you can never go wrong with and that is property. With some careful planning and smart choices, buying a second home as a part of your retirement plan can be one of your best decisions. A second home can be a source of a steady income and security in your post-retirement years. Real estate is normally known to increase in value over time and there are several reasons why financial experts recommend this as one of the best investments.

We have listed some of the major reasons why buying a modest retirement home is a very good idea.

Income from rent

The first and biggest concern you may be facing as someone who is about to retire soon is the loss of a constant source of income. Yes, it can be worrying to think that you will not have money coming into your bank account every month after retirement. But a second home can be your answer to this problem.

A second home can be an easy and simple means to ensure a steady income even after your retirement. Renting out one of your properties means you have cash flowing in every month and don’t have to worry about finances as much. If you have planned your finances well, this additional income can be a good way to take you through your retirement years comfortably.

Investing in other assets has its own limitations. For instance, saving your money in bank deposits will give you a fixed interest only for a limited period and the value you earn will also be quite low. Investing in the stock market is not free of risks either and you cannot rest assured that you will always make profits here. But with rental income, you have no risk but just a steady flow of cash with very little liabilities.

Rent appreciation over time

A second home is also a good investment because your rental income will only be increasing over time. As the area around your home develops further, with new commercial establishments and basic amenities, the value of real estate in the area also goes up. This means the rent you can expect for the property also increases. While there is no significant increase in your maintenance costs, your income can still go on increasing.

Even if you have to avail a loan to buy the property, the rental income can be used to pay your EMIs until the loan is repaid. After this, your rental income is entirely yours and keeps appreciating over the years.

Tax deductions

Now, this is a little more complex as tax laws differ between states. But you may have an opportunity to save on taxes with a second home. Depending on your local and state laws, you can likely deduct the property taxes on any number of properties that you own. This is irrespective of whether you rent it out or reside in it yourself.

If you rent out your property, the rent you receive is usually considered as income. But you can still claim any mortgage interests and costs that you incur during the rental period, showing them as business expenses.

You can always do a little research to see what tax benefits you can get from a second home according to the local and federal tax laws.

Security against emergencies

Having a second home can be your security against future emergencies. As the property value almost always appreciates, you can rest assured that in case of any financial crisis in the future you can liquidate this asset. You do not run a risk of losing a home as you already have one nor do you have to reel under the financial crunch.

Having a second home means you do not have to be dependent on anyone during the autumn years of your life.

Buy a modest retirement home

If you already own a property that is ready to be rented out, your best option is to buy a modest retirement home for yourself and rent out the existing property. A retirement home in one of the 55+ communities in your county can be the perfect place to spend your retirement days comfortably. 55 communities, like Douglas Village, offer all the basic amenities along with a lovely home that has every facility you could ask for. You will also have the company of other active 55+ retired professionals to socialize and enjoy a sense of community.

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