Retirement Planning with Investment Properties

Pros of owning investment properties are obvious. Hypothetically speaking, imagine owning a six-plex in a slow-changing, yet prosperous part of Atlanta where you charged each tenant $1,000. Your monthly mortgage for the building might be $3,000 but you'll still have that extra $3,000 cushion each month. Another benefit of property investments is the generous tax kickback you may receive. If you delight in getting your lump sum tax return at the end of the year, then perhaps investing and selling properties when you need that quick chunk of cash is right for you. Also, there's no penalty for opting out early or age regulations regarding when you can start using your earnings. You don't have to be rich or super business savvy to add property ownership into your retirement planning agenda. It's been dubbed "the equal opportunity wealth builder."

Cons of investment properties include the no guarantee risk. It's also not a feasible option for everyone because of high transaction prices. Not everyone has thousands of dollars saved to make a substantial down payment. Vacancies, bad tenants, maintenance costs and property oversupply are a few of the disadvantages. Like any investment, there are many factors beyond your control that could affect your income. For better guarantees, 401ks or IRAs should be included in your financial retirement planning.

For many investors, higher rents and security deposit requirements keep undesirable tenants out. However, choosing the right location keeps tenants in. You'll want to find a location close to amenities -- schools, malls, highways, recreation. Many seasoned investment veterans have cashed-in on coveted downtown property, although it's not advised for first time investors just looking for low-risk investment properties.

Money Magazine reported the fastest growing markets to be Panama City, Olympia and Spokane. Atlanta, Providence and Albuquerque are safe bets, with slowly changing markets. Beware of places with over-inflated pricing like New York City, Las Vegas or Los Angeles. While these cities may have been cash-grabs in the past, attracting buyers with low interest rates and desirable coastal property, the sustainability of these markets is unlikely. We're starting to see the housing bubble burst for many investors who bought into the craze.

Many couples buy large homes to fit their children comfortably, but find it's too much space when the kids move out of the house. In this case, downgrading to a small bungalow or apartment and letting someone else pay the mortgage is beneficial. While it's not superior to a 401k or IRA, investment properties are a retirement planning option that may work for you.

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