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When it comes to retirement income, real estate can be both a blessing and a burden. Rental properties may provide steady monthly payments — until something breaks or property taxes rise.
Financial expert Suze Orman recently addressed this topic on her “Women & Money” podcast, offering practical advice for retirees who are thinking about selling long-held properties.
A listener named Susan wrote to Orman explaining that she and her husband, both in their 70s, were retired and living on Social Security, a pension, and rent from three properties. She planned to sell one rental she’d owned for 40 years, expecting about $300,000 in proceeds after taxes. Her question: how to invest that money to replace the $1,100 per month in lost rental income.
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“This one caught both my eyes,” Orman said on the show, noting that many retirees overestimate the reliability of rental income. She pointed out that while Susan’s rental netted $1,100 monthly after expenses, real estate often comes with unpredictable costs.
“If all of a sudden something happens and you need new windows, you need a brand new roof, you need a refrigerator…that could be $10,000-$20,000,” Orman explained. “Maybe for that year, you aren’t netting $13,500 a year. It is possible you are actually in a deficit.”
Her advice: don’t assume rental income is guaranteed, and don’t be afraid to sell.
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For retirees like Susan, Orman suggested several potential investment strategies:
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Fixed income options: A mix of Treasuries, municipal bonds, and CDs could offer around 4% to 5% returns — roughly enough to match Susan’s $1,100 in monthly income.
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Growth and income mix: For those willing to accept slightly lower monthly income in exchange for potential growth, Orman recommended utility stocks, dividend-paying ETFs, or real estate investment trusts. These could yield 3% to 4%, providing income and the chance for long-term appreciation.
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Immediate annuities: Another option is an immediate annuity, which can offer $1,400 to $1,600 per month on a $300,000 investment. However, Orman cautioned that this income might end upon the annuitant’s death, leaving a surviving spouse without that income stream.
