Editor’s note: On January 24, NJ.com Hosts New Year’s EmpowerU Money: Resolutions – a free virtual live event. Learn the latest budget and savings tips to meet your 2022 goals! the number of seats is limited. Sign up Here.
That. I have my main house and also an apartment that I rent. I’m pretty much breaking the tie on the apartment, maybe laxative $ 2,000 a year after a mortgage and expenses, and it’s gained value. I’m trying to decide whether to sell it and invest the proceeds of the pension or it’s good to keep the property as an investment. What should I consider?
– Home owner
A. We are pleased to hear that your property has increased in value.
There are a number of factors to consider when deciding whether to continue to hold yours Investment property Or sell it.
First, it is important to consider your sources of income from retirement and your living expenses for retirement, said Melissa Raymondo, a certified financial planner with Beacon Trust in Morristown.
She said it is important to ask yourself whether you will generate income from a pension, social security or elsewhere, or whether your retirement will be fully funded from Investment assets.
“If your investments are going to fund your retirement, you need to make sure those investments are liquid and accessible when you need them,” she said.
Real estate is considered no An illiquid asset. Therefore, if the investment property is your sole investment property or represents a significant percentage of your investment assets, you may need to liquidate to finance your living expenses in retirement, Raymondo said.
“If the property is only part of your investment assets, determining the percentage of your total assets that make up real estate will be important to ensure you are properly diversified,” she said. Ensuring your diversity is critical. “
Diversity is extremely important for overall risk management in any investment strategy, she said.
In addition, you will want to know how much income is generated by yours The overall portfolio, And will that income be enough to fund your expenses or will you have to withdraw from the fund over time, she said. The general wisdom of financial planning dictates that in order to preserve the fund, the expenses should not exceed 3% of the total investment assets each year, she said.
Raymondo said one of the benefits he has Investment property Is that the income generated from the rent can be offset by expenses and depreciation. It can yield a beneficial and tax-differentiated source of income in relation to income and praise generated from a diverse portfolio of investable assets, she said.
Although you may not generate a large positive cash flow, the rent paid during the year adds to your equity in an investment property over and above the possible increase in property value over time, she said.
Some other factors that are worth mentioning are your existing debt and your mortgage interest rate.
“The interest on the mortgage is the cost to you for the investment, however the mortgage interest can be included in the above expenses used to offset the rental income,” she said. “
One last, non-financial but also important factor to consider is your willingness to accept renters and Manage tenants’ cycles Retired, Raymondo said. Often, there are costs and challenges associated with this process that retirees are unwilling to take on, she said.
Email your questions to Ask@NJMoneyHelp.com.
Karin Price Mueller writes the confused Column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. find NJMoneyHelp on Facebook. To register NJMoneyHelp.comof Weekly electronic newsletter.