Most of the working population in the US have a unique idea of how their ideal life should be post-retirement. We fantasize about the time when we won’t have to work full-time and can rely on passive income from alternative sources. One such alternative source is real estate. You must have also come across many successful individuals that became rich by investing in real estate. However, one misconception amongst folks that have retired or are near the retirement age is that investing in real estate is a young man’s game.
We assure you that this is not the case. Even if you have already retired, investing a portion of your retirement funds in real estate can still bear fruitful results. For example, if you own any rental properties, the influx of rent money can help lessen the burden on your retirement savings and pension funds.
The biggest advantage of investing in real estate is that it helps you build an asset with high returns. Historically, real estate properties have performed better than conventional assets when it comes to inflation.
Now, if you have made your mind about investing in real estate, we can help you devise a solid retirement real estate investing strategy. That will help you diversify your investment portfolio while also ensuring that you are not reliant on a single stream of income during the golden years of your life.
Why Invest in Real Estate?
Real estate is perhaps the most reliable source of passive income to use as revenue for your retirement plan. If you own a vacant property or if you choose to invest directly in rental properties, these properties can become a source of monthly income in the form of rent.
Devaluation is a phenomenon that is unheard of in the real estate industry. If anything, real estate investments generally appreciate at a much higher and consistent rate than other conventional assets. Adding real estate to your investments is the smartest way to diversify your portfolio and save for retirement. The best way to multiply your earnings through real estate is to keep investing your profits back into buying new properties and real estate investment trusts (REITs). Once you are retired, you can use your equity to set up a decent retirement income.
Another benefit of investing in real estate is that it is not as volatile as other conventional assets. As we mentioned earlier, real estate properties rarely undergo devaluation and are great immune to fluctuations and changes in the marketplace. That makes it a safe bet to place, especially during your retirement years when you’re entirely reliant on your savings and investments.
Furthermore, real estate investments undergo much less legal scrutiny and enjoy a lot of tax benefits. That proves that having real estate investments in your retirement investments portfolio is a more consistent and reliable way to generate revenue while you’re retired. If you need personalized help in planning your retirement investments, then consulting a team of financial experts can help you choose the most profitable retirement plan for this new phase of your life.
Now that we have explained how lucrative real estate investments can be, let’s look at some of the ways to invest in real estate for retirement.
Own A House
If you think of it, the single biggest asset for most people is their house. However, it is rarely ever thought of as a source of revenue post-retirement. That is because people are unaware of how they can leverage their home equity to generate a passive income. One of the best ways to build your financial independence is to rent out a portion of your house. If you have a house with one or more spare rooms, you can use it as an opportunity to earn a decent amount of rent money.
Real Estate Investment Trusts (REITs)
REITs refer to an investment in a collection of properties or other real estate assets. It is similar to investing in mutual funds, where you buy shares in a collection of properties instead of company stocks.
But, how are you paid back for your investments in REITs?
Well, the process is pretty straightforward. REITs are obligated to distribute 90% of their income as dividends to shareholders. This means that REITs have a special tax status that regulates a trickle-down effect. Amongst the different types of REITs, equity REITs provide the most stable stream of revenue. That is because equity REITs allow investors to buy, sell and collect dividends from shares of actual properties.
Buy, Fix, and Flip
Flipping, in regards to real estate, refers to the act of buying a property to resell it at a higher price after making some renovations. Property flipping can be a double-edged sword. If you have a knack for construction and interior designing, this might be a great investment avenue for you. However, it can also turn out to be a source of financial distress if you do not know what you’re doing. Therefore, if you do not have prior experience working in the real estate industry, you should not directly dive into the flipping business.
Buy Residential Property and Find Long Term Tenants
This is the simplest and perhaps one of the safest forms of real estate investment is to buy a house and rent it out. Needless to say that people will always need somewhere to live, and that means dealing with rental properties to generate some steady cash flow. The smart way to go about this is to find long-term tenants who can pay enough rent to cover all the expenses, including any mortgage, insurance, taxes, and maintenance. That makes it imperative to find a property in a great location, as even run-down homes in the right area can generate you a decent rent.
However, keep in mind that managing rental properties can become a challenge. If you have already retired, you can find time to look after such properties on your own. However, if you plan to do this as a side hustle, it is better to have a property manager who can take care of these responsibilities. Using this formula, you can earn an income without working at all.
Real estate can make a good retirement investment. Many people have secured a comfortable lifestyle post-retirement by building a portfolio of real estate properties that gives them a steady source of income. Therefore, if you have not thought out your strategy for retirement income lately, it is time you do so!