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Retiring With Single-Family Rentals

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When most people think of retirement, most think of a far-off day at some distant point in the future. It’s when they’ll hang up their hat, stop working, and kick back in a hammock with a drink (or two!) –all while their Social Security Benefits roll in, keeping them financially solvent well into their Golden Years.

But with the official age of retirement continually getting pushed forward, and with growing skepticism –particularly among Millennials, about whether they’ll even receive Social Security benefits by the time they retire, the issue of becoming financially self-sufficient during retirement is becoming more pressing.

Additionally, with the concept of early retirement becoming increasingly popularized, many people are asking “why not?” and working on their own version of retirement; creating passive income streams, and financial security so that they can retire sooner rather than later, comfortably –and on their own terms.

What’s stopping you from early retirement? See: How to Retire Early Through Real Estate Investing

In many ways, real estate can be your ticket to financial freedom; particularly when it comes to rental properties. And everyone from large-scale investors, to business owners, and everyday landlords alike are using real estate to retire early, and reach their goals of financial freedom.

Whether an early retirement is in the cards, or you’d like some extra income to help support you well into the future –then here’s a look at how you can use SFR investments to help make those distant, long-term goals a real and solid reality. 


Take Control of Your Financial Future

When it comes to your future –what does your ideal retirement look like to you? Where would you like to see yourself in ten, twenty years’ time? What are your big-picture goals, your plans? What excites you –gets you out of bed in the morning?

Taking control of your financial future starts by visualizing exactly what your version of retirement looks like. For some, it could be semi-retirement at the age of 35 –where they work a couple of hours a day, and largely on their own terms. For others, it could simply be an early retirement, stepping back from the rat race at the age of 50 –and able to travel, or just enjoy life, without having to worry about their finances. Whatever your goals are, it’s important to identify them and give yourself something concrete to work toward.

How does SFR fit into a retirement plan? That depends on your goals –and the timeframe you’re working with. In any case, it’s almost always a good idea to diversify your portfolio, and rental investments are a great way to add diversification.


The Benefits of SFR Investments

But diversification isn’t the only benefit that SFR offers.

SFR investing, when done right, can be a great way to hedge against inflation, adding long-term security to your portfolio.

Why? It makes sense when you think about it. Instead of just investing in stocks or securities, or keeping cash in the bank, real estate –and particularly rental properties offer a wealth of benefits that other investments just don’t offer; making it the perfect counterbalance for portfolios that contain primarily stocks and shares or securities.

With inflation (roughly 2% per year) eroding away at the value of the dollar, the rising cost of living, and incomes that just aren’t keeping pace –it’s easy to see how socking away cash alone just isn’t going to cut it when it comes to building your nest egg for the future. Meanwhile, 401(k) plans offer a much higher rate of return than cash, but since they’re largely tied to the stock market –they’re not risk-free.

Investing in solid assets, though, gives you a hedge both against inflation and the rising cost of living.

Consider, for a minute, cash flow –something that SFR provides. Nationally, U.S. rents have been increasing, and are only continuing to rise. In June (2019), the average rent was up 3.2% year-over-year, and it’s experienced an average increase of 3.09% per year between 2000 and 2019. This puts anyone who owns rental property can safely expect long-term and, in most markets, steadily increasing cash flow.

There’s another reason to invest in rental property as well –tax breaks.

According to a recent survey, 37 percent of business owners who owned rental property investments said they were doing it solely for the income, however, the vast majority said they had expected a number of benefits, including tax breaks.

“Real estate is the last effective tax shelter out there,” says Lou Vlahos, a New York-based tax attorney. “The income you can earn from rent, the ability to borrow against the property, and the tax deductions all provide benefits you can’t get with most assets.”


Other benefits that SFR offers include:

  • Long-Term Equity Growth –As you and your tenants pay down the mortgage.
  • Long-Term Appreciation – As the property, ideally, increases in value.


Instead of having to depend solely on Social Security payments during retirement, or just living off of your 401(k), rental property investing brings valuable diversification into the cards. It’s a great way to generate, and grow your wealth –and ideal for everyone from first-time investors who have years left before they retire, to those who are already nearing retirement age.  

Now, let’s take a look at what you should know if you’re hoping to add SFR to your portfolio.


Getting Started With Investing

It isn’t a way to ‘get rich quick,’ but investing in income property can provide a stable source of income that can help you make your retirement goals a reality.

Here’s a look at how you can get started. 

Make a Plan

The first thing you’ll want to do is to consider your long-term goals. When would you like to retire? How many years do you have until then? What would you like to generate in monthly income? How many properties do you need to reach those income goals, and what type of returns will they need to be generating?

These are all great questions, and only you can answer them. Most people want to live a comfortable life after they retire, but the term comfortable is relative. While some people may be happy with $4,000 per month, others would need $10,000 –or more, in order to feel secure in retirement. It’s important to establish your income goals and ensure that your cash flow, the amount you have leftover after the expenses for the home are paid for, is enough.


  • How Much Do You Need Each Month?

How much are your monthly expenses? How much money will you need to live comfortably? Many experts recommend using the 80% rule, which says you’ll want to be able to generate 80% of your current annual income once you’re retired, but your circumstances may be different –and you may decide that you’ll need less, or more. Consider also, that there’s a good chance that you may have fewer expenses by the time you’ve retired.


  • Establish Your Investing Criteria

From here you’ll want to determine how many rentals you’ll need to invest in, and what type of returns you’ll need to generate in order to maintain a comfortable standard of living in retirement. What type of returns should you look for? That depends. While some investors are happy with 10%, others insist that their rentals produce at least 16% and you’ll want to determine for yourself what type of yield you’re going to look for when investing.

Start Investing

It’s time to take the leap –and find your first rental property. Where do you start? You’ll want to find an area with strong rental demand, an area that’s growing, and expected to experience appreciation.

With many housing markets today red hot, many investors are turning toward secondary markets.

What data should you look at when assessing a market? Consider starting with population growth.

According to a joint study by PWC and The Urban Land Institute projects that the populations of New York City, Chicago, and Los Angeles will grow at a slow rate of just 0.5% for New York, .6% for Chicago, and .4% for Los Angeles. Meanwhile, though, places like Houston, Phoenix, Charleston, and Boise will increase at the significantly faster rates –of 2% for Houston, 2.1% for Phoenix, 2.1% for Charleston, and 1.9% for Boise. In addition to population growth, you’ll also want to look at other factors –like rent as a percentage of household income, the affordability index, and what the primary industries are. (See data from PWC).

Many investors are findings success in the Midwest, where jobs are growing and a lower cost of living means that their investment dollars go farther.  

Note: Not sure where to start when finding properties to invest in? These days, it’s easier than ever to find the information that you need to invest –it’s all at your fingertips. At Renters Warehouse, we’re working to make SFR investing a seamless and straightforward process, by providing investors with the tools they need to make informed investing decisions.

Use our Research Center to see key data and insights on housing markets throughout the country –including population trends, demographic trends, employment, housing prices, and more. Or, view our Investor Marketplace –and find turnkey properties, and even portfolios –ready to go.

Run the Numbers

Once a prospective property is in your sights, you’ll want to ensure that you run the numbers to see what your cash flow, cap rate, and cash-on-cash returns are. Make sure the property’s worth investing in, that is, that it’ll generate income that’s in line with your big-picture goals –if not, let it go. Your money will be better off elsewhere. 

See: How to Determine If a Property Is Worth Investing In


Invest for the Long-Term

When it comes to retirement planning, it’s important to invest with a long-term perspective. This means assessing a property’s viability as an investment both now, and in the future as well. So look for areas that are experiencing healthy rental demand.


You’ll also want to look for properties where tenants will want to stay for longer. For this reason, some experts recommend investing in two or three-bedroom properties, as opposed to one-bed; as they tend to have higher tenant retention rates, as tenants won’t have to move every time they experience a life change. Take care of maintenance issues and keep them in good condition to attract applicants who will want to do the same. Consider enlisting the help of a property management company –as this will take the hassle out of rental management, and free you up to expand your portfolio. With rental investments, it’s largely a matter of quality over quantity. It’s much better to have a few solid, high-performing properties than to have your capital tied up in properties that just aren’t performing that well or producing returns that are not in line with your goals.

Single-family rental investments, when done right, tend to provide more stability and security than other types of real estate. Tenants tend to stay put longer (3 years on average), and look after the properties better –meaning they’ll be less hassle for you and lower turnover rates.


When it comes to investing for retirement, it’s important to keep in mind that success won’t happen overnight. It takes time to build an empire. But by starting early, you’ll have one distinct advantage on your side: time. Time has a compounding effect on your investments and the earlier you start, the higher your returns will be. So create a plan for success, and map out how you’re going to get there. With the right approach, you’ll be able to set yourself up for long-term success, and start working your way towards your retirement goals.

Renters Warehouse, our goal is to help investors to invest, manage, and enjoy the benefits of long-term financial security. Reach out to a Renters Warehouse Advisor today to see how you can start investing and growing YOUR portfolio.

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