If you speak to a financial adviser about ways to increase your retirement income, s/he’ll probably tell you to start by reviewing your available resources and thinking of creative ways that you can maximize those resources.
For most retirees, their most valuable resource is their home. By retirement age, a person’s home is generally completely or almost completely paid for, so optimizing its use won’t involve too many expenses. This will leave the proceeds for you to use at your leisure.
Many seniors jump into the trap of selling their home to downsize or refinance when they get into financial difficulties. But before you make such a move, check out the ways that you can put your home to work for you as an asset. It’s more preferable to have your home producing income for you than for you to sell the home, realize a one-time payout and then see your nest egg dwindle away.
* Consider a long-term rental. It probably won’t involve a large expense for you to build a separate entrance, kitchenette and bathroom in order to rent out a section of your home. You can recoup your loss within a short period of time in rental income and then continue to rent out your property, with the resulting income going directly into your pocket.
According to recent trends, rents are rising and vacancy rates are dropping, so more people are prepared to pay more money for available rental properties.
You can contract with a property management company to handle all of the interaction with the tenants, including negotiations, rent collection, repairs and maintenance. Some internet companies can help you market your property.
* Short term rentals are a good money-earner for vacation regions. It’s easier than you think. There are a number of online vacation rental sites that will promote your property for a small percentage of the rental income. While you wouldn’t have the full-time income that a long-term rental would give you, vacation rentals give you a high per-day premium to make up for the difference. You must be prepared, either yourself or using employees, to keep your place clean and well-maintained.
* Reverse mortgages let you age in your own home. Reverse Mortgages are for retirees who seek a little more income so that they can enjoy a better quality of life.
A HECM, or a Home Equity Conversion Mortgage, is a federally insured loan product that allows you to draw your equity via a line of credit or through monthly fixed payments. Repayment on the loan doesn’t occur until you leave the house or die. You are obligated to maintain the home by staying up-to-date on home maintenance, household insurance, hazard insurance, property taxes and loan interest payments. If you don’t make these payments in a timely manner, the lending institution can foreclose on the house. But if you’re careful to fulfill all of your loan obligations, you can access the equity that you have in your home for your own benefit.
It’s important to remember that, as a loan product, the closing costs and fees reduce your available equity. Also, by taking out a Reverse Mortgage, your heirs may not be able to retain the property if they aren’t able to satisfy the terms of the loan after you die. So consider your estate plans if you choose this route.
Reverse Mortgages are available to individuals who
- Are 62 years of age or older
- own their home or have paid off enough on their mortgage to ensure that a HECM loan will cover the remainder