If you’re approaching retirement age, you might be wondering what types of investing you should continue to do while you live out your retirement years. Real estate is one of the options some retirees utilize to bring in money to fund their golden years.
Investing in real estate in retirement may not be the right path for everyone. But there are plenty of solid reasons to consider it as a part of your portfolio. Here are 5 of the top reasons to consider real estate investing in retirement.
- It’s a tangible asset that brings in cash flow.
Real estate property has a physical form and therefore naturally possesses value, regardless of what the markets may be doing. If you have invested a considerable amount of money into retirement accounts like 401(k)s, IRAs, and other accounts, you might wish to diversify by putting some of your money into a more tangible asset.
Real estate may provide greater financial security during retirement because it’s not tied to the stock market. If you’ve been able to pay for a property in full, you can then rent it out for ongoing monthly income during retirement.
You also have the option of selling your real estate property at whatever point in your retirement that it makes sense to do so. This will give you an influx of cash to help fund expensive medical care or other financial needs that come up.
Be sure to carefully research where and what type of properties to invest in. Savvy real estate investing can lead to wonderful cash flow, which is important during retirement.
- There are tax advantages to owning rental property in retirement.
If you own rental property, you can likely take advantage of several tax breaks available. You are allowed to deduct many expenses related to your real estate properties, including interest, repairs, and depreciation.
When you set up your real estate investments, you may be able to maximize your tax deductions and thus lower your tax rate.
- You may be able to purchase property at a bargain price.
Your real estate strategy should be to acquire properties at the best possible price for you. Wait and search patiently for the right property to come along, and don’t rush into buying before you’re ready. Waiting may lead you to an excellent rental property for a much lower purchase price than other properties you may see on the market.
By taking advantage of deals in real estate, you can increase your probability of paying the property off quickly and then earning solid passive income from it.
- Rental property can give you a sense of purpose.
Often, retirees struggle with a sense of purpose after losing the identity of their career. This is understandable, and if you haven’t cultivated hobbies or relationships, this can be a tough transition. When you invest in real estate, this can provide welcome tasks to do on a daily, weekly, or monthly basis.
If you don’t want to merely lie on the beach all day, real estate investments can provide a much-needed “job” even after leaving your full-time job. Having a sense of purpose is essential in overall health and happiness.
- Rental property may perform better than the stock market.
With any investment, your returns are generally not guaranteed. But it’s possible that your property could appreciate at faster rates than your retirement accounts.
Most investment experts advise that you don’t “put all your eggs in one basket”. Of course you should also invest in retirement accounts and utlilize the stock market, but real estate can be another valuable prong in a multi-faceted retirement approach.
If some of your more traditional investments are underperforming, your real estate property may be bringing in great cash flow. This can help balance out your total portfolio.
Real Estate is Worth Considering
Real estate investing is not for everyone, and it’s not without its challenges, but many retirees can benefit a great deal from investing in real estate. The benefits of diversifying your portfolio and creating multiple income streams are worth consideration.