Rental-home success banks on finding quality tenants

Q: I’m retired and concerned about my investments. I have no confidence in the U.S. economy. My wife and I have roughly $1 million in an investment account, own our home free and clear, and have no other debts. We’re thinking about buying a different house (for about $250,000) and renting ours.

The rent would net us about $1,350 per month. We’d pay cash for the other home. I think that having more money in real-estate assets would be safer for us. What do you think?

A: The level of risk a person wants to take is a very personal decision. We usually don’t advise our readers on the amount of risk they should take, but rather highlight the potential effects.

For example, let’s say your current home is in one area of Atlanta and your new home is on the other side of the metro area, or in the mountains in northern Georgia. If the two properties aren’t near each other and your tenant needs handholding, you could find it time-consuming and annoying to be a landlord.

Before moving ahead, you need to make sure you want to be a landlord and are willing to deal with tenants, or the possibility that you might not have a tenant if you can’t rent the property.

The purchase of real estate is not a liquid investment, but if you find good tenants, the cash flow can help supplement your retirement income beyond what you’d get from stocks or bonds, and certainly from cash.

Another thing to consider is if you sold your home, what you would do with that cash? If you invested it, how would the return compare with the about $16,000 per year you’d get from a tenant — assuming no big expenses are needed to prepare your home.

In addition, we hope you’d see some appreciation in your original home’s value.