Today I want to talk to you about investing in real estate as part of your retirement plan. I’m a little biased because I have invested in real estate as part of my own retirement, but I’ll do my best to be objective. Here are some pros and cons of investing in real estate:
- You need active knowledge about the industry. If you want to invest in real estate locally, you have to learn about the industry and understand its inner workings.
- You have to actively manage the properties. This can be time consuming because you will be actively managing maintenance calls, setting up showings, and running the properties. Unless you have a ton of capital, you’ll be doing all these things yourself.
- You need a significant amount of capital. There are stories about ways to get creative and put little or no money down, but those are the exception, not the rule.
- You’ll get a significantly higher return on your investment. This is assuming you’re in a decently appreciating market like south-central Pennsylvania and you’re holding the property for the long-term, not just short-term sales.
- There are significant tax advantages to investing in real estate. It’s best to speak with an accountant about the details, but if you buy enough real estate, those tax advantages do add up over the years.
- You can eliminate most of the risks involved in investing in real estate if you’ve taken the time to understand the industry and you’re investing in a market that remains moderately stable and isn’t as volatile as some of the other markets in our nation. This is especially true with long-term ownership and residential rental properties.
One of the strategies that I particularly love is buying a property at or around the time of the birth of a child. You can then pay it down and use tax-free refinance income or equity to pay for all or part of the child’s college education. You can then pay it back down and do the same thing to supplement your retirement income later down the road. You’re using the same property for a dual purpose, and it makes the investment valuable to you and your family.
I think that real estate investment is a great way to save for retirement alongside other investments like securities and other investment tools and is a great way to get you farther in reaching your retirement goals.
If you have any questions about real estate or anything else in the real estate market, please don’t hesitate to reach out. I’d be happy to help you.