Choose the right financial sources
One very important thing when you start considering investing in a rental property is to be debt-free. No debt and an emergency fund that covers 3–6 months of expenses would be ideal. Here’s how 21 Tips to Boost Your Emergency Fund in uncertain times.
In terms of sources of capital, a loan would be the most plausible approach. However, according to Kelli Click, president of Strata Trust, you can also invest some of your retirement funds in rental assets such as residential rental properties, commercial space or even land.
“A self-directed IRA gives you the opportunity to make investment decisions in areas based on your knowledge and expertise”, she adds. This option will allow you to avoid going into debt and detract the interest payments from your returns. To make sure you know all the details about this procedure, consult the IRS policy on this issue or ask for the advice of a third-party property manager.
Read also: 12 Smarter Options You Should Try Before Raiding Your Retirement Funds
