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Using Rental Properties to Fund Retirement Is Not For Everyone

Using your Baltimore County rental properties to fund the golden years of retirement is a great idea, especially if you don’t have a pension.  Rental properties can provide monthly cash flow, are protected from inflation, and usually appreciate over the long term. You rental properties can often allow you to lead the life of retirement you have always dreamed of.


However, there are several things you should consider before you jump on the real estate bandwagon and attempt to fund your retirement with your rental properties.  Though it can be a rewarding and financially lucrative option, using rental properties to fund retirement is not for everyone.

Let’s take a look at some of the things you should think about before deciding to use rental properties to pave your way into Act III.

How Long Until You Retire?

A rental property can take a few years before it provides you a stable positive cash flow.  Although some markets are in high demand and call for very high rental amounts, the truth is, not all locations will generate huge profits right away.

In addition, if you own properties in the small town of Parkville, chances are you have a long-term tenant that plans on renting from you for a while.  Increasing the rent each lease renewal to boost your cash flow may cause your tenant to leave, and then you are left with a vacant home and no income.


If you are retiring in 5 or more years, you will probably be able to stabilize your property’s cash flow enough to at least supplement, if not fully fund, your retirement.  However, it would be wise to consider other options as well, just in case your properties don’t provide like you expect them to.

Can You Fund Your Properties?

Wanting to use rental properties to fund your retirement is a dream that many have but cannot initially afford.  You must have enough money saved up to begin the investment process in order to achieve your goals.  Many banks require up to a 25% down payment on investment properties and expect a solid savings account for unexpected costs as well.  After all, they need to protect themselves from you not being able to pay your mortgage.

Unfortunately, many middle class retirees simply do not have enough cash or other assets to use for financing rental properties.  And, getting yourself into debt trying to fund your retirement using rental properties is not advisable.

Can You Cover Fees, Taxes, and Repairs?

One thing that is often overlooked when it comes to owning rental properties is the homeowner association fees, taxes, and repair costs that are associated with each property.  Fees and taxes are inevitable when it comes to owning any home, even in the town of Essex.  You must be prepared to pay these annually, in addition to any homeowner’s insurance coverage you may need to protect your property.

Maintenance and repair costs are another unavoidable fact you must deal with when in the rental property business and they can be very damaging to your bottom line.   One wild college party in your Towson rental home or a destructive storm can cause enough damage to create a negative cash flow for you that may last the entire year.

You should really consider if you are prepared to take on this type of risk when it comes to your retirement income.  If you cannot financially withstand these extra costs, and are not prepared for a large emergency repair, maybe leasing your properties to fund your retirement is not the best choice for you.

Do You Have Liquid Assets?

If you need a lot of cash in a hurry, don’t look to your Pikesville rental properties to provide it for you.  In an ideal situation, you will be able to sell your home for a profit, but this is not always realistic.  The housing market has many up and down cycles and if you are forced to sell during a down time you may get less than you hope.

Even worse, you may not even be able to sell your home.  Then you will be stuck paying a mortgage you cannot or do not want to afford.   It is extremely risky, especially during retirement, to rely on your rental property income to support you and your retirement dreams.  With no liquid assets to fall back on, you may find yourself worse off than if you had never invested in rental properties in the first place.


Are You Diversified?

While owning real estate is certainly a great way to supplement (and possibly completely fund) your retirement years, understanding the importance of diversification will protect you against unexpected costs should they arise.


You should never fully rely on only one type of investment for retirement.  Funding liquid assets such as money market funds and mutual funds, retirement accounts like 401Ks or Roth accounts, and saving up cold hard cash are ways to cushion a bad situation should something go awry with your rental property such as a large repair cost or an unexpected vacancy.

Are You Ready To Be A Landlord?

Using rental properties to fund retirement is a good way to generate a lot of steady income if done properly; however being a landlord is not always a welcome job, especially for those in retirement.  Using your Owings Mills property for retirement funds can be a lot of hard work if you choose to manage the property yourself.  You may find yourself working a full-time job managing your properties, which defeats the purpose of a retirement.

On the other hand, if you go with a property management group to help manage your property, you can expect to pay up to 10% or more of your monthly gross rent payments towards rent collection and other management services.  Again, this is not necessarily helping you achieve financial freedom during your retired years.

Luckily for you, Baltimore County has one of the best property management teams around charging a low 8% management fee, among the lowest in Baltimore and the Washington, D.C. metro area.  Plus, with all the services they offer you will be able to enjoy all of your retirement years in peace, minus the hole in your pocket:

  • High quality tenant placement with competitive rental rates
  • Thorough lease drafting
  • Strict rent collection policies and eviction procedures
  • Knowledge of all relevant landlord-tenant laws
  • Routine inspections
  • 24/4 maintenance crew
  • Financial transparency


Overall, using your Baltimore County rental properties to fund your retirement years can be extremely favorable.  You can maintain a steady stream of income, protect yourself against inflation, and maybe even make a large profit off of the appreciation later down the road should you choose to sell the property.

The truth is, using your rental properties to fund retirement years is not for everyone.  It will never be totally hands-off and there will be financial problems that creep up from time to time.  However, if you use Bay Management Group to help you manage your properties, it may just be a venture you want to take on in your later years.