Rental property can provide a steady source of supplemental retirement income.
While no investment can be considered completely safe, some are more secure than others. Real estate has historically been a good investment choice, even in times of economic downturn. Investing in rental properties can offer a steady stream of income and long-term capital appreciation, as well as possible tax benefits. Identifying the safest types of rental property investments can be a complicated process and may take some research to fully understand.
Multi-unit Residential
In some cases, where income from only a percentage of the units is required to cover monthly costs, a single vacancy may only affect monthly profit.
Vacancy can spell disaster for rental properties. Lacking a tenant, the property owner is responsible for the monthly cost and maintenance of the property, resulting in a negative property cash flow. Multi-unit residential properties can help alleviate some of this cost in the event of partial vacancy. For example, a single vacancy in a four-unit apartment building will cost a property owner 25 percent of a typical month's income. The remaining three units will continue to produce income until the fourth is rented.
Bank-owned Property
Many banks post foreclosure auction notices on their website.
Bank-owned or other properties in foreclosure can offer an excellent real estate investment. Since the bank or mortgage company is often only interested in recouping money they have invested in the property, real estate investors may be able to purchase a rental property at a fraction of its value. The result may be a substantially reduced monthly mortgage expense and immediate equity. This combination of factors can make bank-owned properties a safe and profitable rental property investment.
Established Commercial Property
Major retail tenants may be willing to sign long-term leases.
Established commercial property can offer a reasonably safe and secure rental property investment. Commercial properties with "anchor tenants" or businesses with long-term leases offer the best investment choice and can reduce the risk of vacancy. Multi-unit commercial property, such as malls, office buildings or shopping centers, can also provide the same safety nets as multi-unit residential properties, as well as provide free advertising opportunities when units become vacant.
High-demand Vacation Rentals
Beach-front vacation rentals are typically a safe investment.
Vacation property rentals, both single- and multi-unit, can offer a high rate of return in the right area. Properties in high-demand areas such as those located near major attractions, close to the beach or ski slopes, or in a major tourist hub city can often cover an entire year's property costs with only a few months rent. Combined with short-term rentals during the off season, vacation rental property can offer a safe real estate investment.
