Real Estate Investments as Alternative Retirement Income
No matter how well you think you’ve prepared for retirement, you’ll likely always wonder if there’s more you could do. As it turns out, there is-- investing in real estate can be a great way to continue to make money in retirement and keep yourself busy! However, investing in real estate can also be risky business with a lot of pros and cons.
Advantages of Investing in Rental Properties in Retirement
You have ongoing income. When tenants are paying you rent, that means you’re going to have money coming in every month, as opposed to taking money out of a fixed retirement account and fearing that the money may run out.
Inflation is on your side. Landlords have the ability to raise their tenants' rent each year to keep up with inflation. This means that while your mortgage payment on the property stays the same, you can increase your cash flow to widen the gap between your income and mortgage payment.
Your net worth will go up. Rental properties usually appreciate in value over time. When you combine this with the fact that your tenants will eventually get your mortgage paid off over time, your debt will continue to shrink until your mortgage is paid off and you can pocket the money you make from then on.
You can predict your returns more accurately. You never know how a stock or mutual fund will perform when you buy one. However, with real estate investment, you can make much more accurate predictions about your income-- you know how much your rental property cost, you can determine how much to charge for rent with a little market research, and you most likely know where that income will be going.
Disadvantages of Investing in Rental Properties in Retirement
You’ll probably have a lot to learn. Anyone can buy stocks, but in order to be successful with rental properties, you’ll need to understand how to finance properties, how to calculate rent, how to get and manage tenants, how to evict someone, etc.
It can be a lot of work. It can take a lot of work to find good deals on rental properties and close a sale. On top of that, it can be a lot of work to manage that property after you’ve bought it since you’ll have things like rental applications and maintenance to keep up with.
Lack of liquid assets. Stocks are considered “liquid”-- you can buy or sell them at any time to convert your investments back to cash. Real estate, on the other hand, is a long-term, illiquid investment. It can take months to sell if you decide to stop doing it, and selling any property can be expensive.
Is Real Estate for You?
If you think you’re ready to invest in real estate in retirement, you’re probably going to need some help-- Peter Brunton can help you out!
