If you are planning for retirement, you may be considering real estate investment. Real estate cuts across all ages and it is not only for young people. As a retiree, you could be earning passive income from your investment. But this is not what usually comes to the minds of people when they are planning for retirement. They are often afraid that the market is unpredictable.
However, you can make adequate returns on investment if you invest in the right property and secure proper management. Search for property manager sites to find the right company for you. Before you invest in real estate investment as a retiree, you need to know the benefits and disadvantages.
Here are the benefits of investing in real estate as a retiree.
1. It provides an additional source of income
If you invest in real estate, it will provide you with an additional source of income. Your income can even be passive if you are investing in rental properties.
Owning rental property as a retiree will provide you with regular rental income during your retirement. You can use this rental income to supplement your retirement savings. As a result, you wouldn’t spend much of your savings and social security benefits.
2. It keeps you active
During retirement, people tend to spend a lot of time at home with nothing to keep them busy. It often becomes boring after some time. That is because they were already used to staying active.
If you invest in real estate, you will have something to do with your time. Aside from boosting your income, real estate investment will keep you active and your time will be engaged in a meaningful venture.
As a retiree, you have the time to manage the property by yourself. Doing so will help you cut down the expenses that consume part of your profits. However, you should only manage your property if you have the necessary skills and knowledge.
3. Diversifies your portfolio
A lot of retirees often invest in stock and bonds. If you have these investments already, real estate will help you to diversify. As a result, you can enjoy income from several sources.
If one investment is not doing well, you can make up for the losses with another one. In that way, diversifying your portfolio gives you financial protection.
For instance, an economic recession can affect stocks and bonds. When this happens, the investment losses its value. But if you had a rental property as a backup, you will still be receiving regular rental income to cushion the effect. Your rental property will sustain you until other investments pick up.
4. Tax benefits
Owing a rental property helps you to enjoy some tax benefits. The benefits could be from mortgage interests, property taxes, repairs, maintenance, and so on.
Disadvantages of investing in real estate as a retiree
1. Financial risks
Like every other investment, real estate also has financial risks. You could lose your money through unpredictable markets, lack of liquidity, high vacancy rates, legal issues, structural problems, bad tenants, poor location, property depreciation, negative cash flow, and foreclosures.
2. Increasing cost of maintenance
Although the value of properties increases over time, the cost of managing them can also increase. It could be as a result of the increasing maintenance or repair fees as the property ages. In addition to this, property taxes can be rising over the years.
As a landlord, you have several responsibilities. These include property maintenance, rent collection, tenant complaints, and so on. All these issues will take your time. Although you can engage property managers to handle these, note that it will incur more expenses.
4. Bad tenants
If you rent your property to bad tenants, they can abuse your property and make it lose value. When this happens, the property can reduce your net worth instead of adding to it.
How to invest in real estate as a retiree
No investment gives a 100% guarantee for success, but you can boost your chances of succeeding. All you need is some amount of knowledge, the necessary skills, intuition, and guts.
1. Improve your knowledge
If you are new to real estate investment, we recommend that you boost your knowledge before you venture into it. Learning will require your time and patience before you can become an expert. To improve your proficiency, you need to attend training, conferences, or seminars and read books.
2. Polish your skills
You need to polish your skills so that you can make enough income in real estate. Your mastery will help you invest in quick selling, income-generating, and appreciating properties.
3. Develop your intuition
If you develop your intuition, you will eventually know which properties are going to be in high demand and the ones that will depreciate. Your intuition will also lead you to lucrative locations.
In a nutshell
Real estate is a lucrative investment for retirement. As with every other venture, you need adequate knowledge and information so that you can invest without incurring losses.
If you’re considering investment properties as a source of retirement income, don’t hesitate to reach out to Real Property Management Principles. We can make your investment truly passive by taking care of everything, so you can enjoy your golden years. You can contact us online or call us at 816-890-9800.
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