Owning rental houses far exceeds the benefit of the pension that you may receive from your job. I worked for the state of Arizona for 13 years, and I will one day receive a pension of around $1,000 a month.
But, does that really provide security?
Each year the value of my pension will go down because it is not tied to inflation. So, after 10 years I’ll still receive $1,000 a month but because of inflation, it may be actually only worth $100 dollars a month because the cost of my groceries, my clothes, health care, and other costs have all gone up each year.
Rental houses provide a better pension. If I get $1,000 a month in rent profits, it not only keeps up with inflation, but it exceeds inflation.
Which pension program would your rather have? One that increases in value with the passing years, or one that decreases in value?
Tags: multiple streams of income, rental house, rental property, renting properties, turn your house into a rental
there are a few pieces missing from this article:
1) Your pension is taxed (probably at the federal level, though AZ exempts pension income from being taxed), other states are not that generous.
2) Rentals have depreciation, which can offset the income generated.
3) Rentals are a business, so you can deduct things like: use of the car, use of a phone, home office (based on room count), office expenses, maid, utilities, etc.
4) Rentals can be 1031 exchanged for newer property to avoid maintenance costs, or maybe to turn into a vacation home after two more years.
5) Rentals can be left to the children, where I believe the basis gets adjusted to market value, avoiding taxes and leaving way more to the kids.
6) If you had stocks and bonds, you would also be fighting lots, and lots of fees in addition to taxes at the federal level and the state level.
7) But it’s not all peaches and roses, rentals take work and often more money to feed the “alligator”.
Enjoy.
Tim,
Thanks for those adding those additional positive components of rental properties!
Terry
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The incredibly preferred standpoint of owning land property over having an annuity is that your benefits are fixed and what you get when you begin it, is all you will ever get For
Thanks for your comment. There is a huge upside to holding onto your property for several decades as tenants pay the rent (and the principle on your loan) and you ultimately harvest the equity.