At first glance, using real estate as a retirement investment does seem like a decent idea. You use the money you have now to purchase property that will provide you with a steady income in the long run. What’s there not to work?
Well, when you simplify it like this, any retirement idea sounds genius. But, in actuality, there are certain aspects to consider before deciding to invest.
In this article, we will go over those aspects and hopefully help you determine whether real estate investment is the right retirement plan for you.
Is using real estate as a retirement investment a good idea?
There are four aspects that you need to consider to answer this question correctly.
- How much money do you plan to invest in real estate?
- How much time do you have before retirement?
- Do you have any experience with real estate?
- What kind of real estate do you plan to deal with?
Answering these four questions is a good start in deciding whether investing in real estate is an endeavor worth pursuing. Some people have ensured a decent retirement by making careful investments. But, they first needed to have the funds to support their investments. The knowledge to pursue the right ones. And, let’s face it, a bit of luck.
Figuring out money and time
As it is with every investment, money and time are of the essence. Not every person has the necessary funds to make a worthwhile investment in real estate. If you need to take a loan, your best bet is to start looking into it as soon as possible.
First, you need to have a firm understanding of taxes and loans. And, second, combining retirement and paying mortgage loans is a bad idea. Expect that you will be pretty limited when it comes to extra income while retired.
Furthermore, the younger you are when taking out a loan, the lower the rates are. While you might think that you will live to be a 100, banks are less keen on making that bet. So, they tend to increase rates the older the person is.
Ideally, you will start considering your retirement real estate once you have a steady job. If you luck out and get the right piece of land right off the bat, that will be great. But, as we will soon elaborate, you will need to learn.
And with learning come mistakes, which can be surprisingly costly when it comes to real estate. All in all, keep time in mind as an essential factor, especially if you don’t have a lot of money saved up.
Where & What Type of Real Estate To Pursue
The second thing to consider is what type of real estate to pursue. While a commercial real estate investment is often more lucrative, it is usually far more expensive. Therefore, you need to have a large budget and expect to get a sizable loan if you plan on pursuing it.
On the other hand, residential real estate is cheaper, although less profitable. If you plan to flip your property for a profit, know that you are playing a dangerous game where many factors outside of your control can make a huge difference.
On the other hand, if you plan on renting, know that your retirement won’t be as relaxed as you have dreamed. Being a landlord comes with its own set of difficulties, responsibilities, and unforeseen circumstances. You can opt to delegate the landlord’s job to an agency. But this will take away from your retirement funds.
Lastly, it would be best if you considered where you would invest. Investing in the local area is usually a good idea, as you can have an easier time figuring out whether the real estate is profitable.
On the other hand, who knows whether you will live here during your retirement. What if you wish to move to a sunny beach for your golden years, and yet you have to collect rent and maintain your real estate. These are all questions to consider before you make your decision.
To Invest, Or Not To Invest?
In the end, it boils down to your funds and experience. If you feel that your investment is financially sound and that it can pay off in the long run, go for it.
Our advice is not to shy away from consulting with experienced professionals and to base your decision on hard facts, not unsubstantiated rumors.
How To Invest
Let’s now assume that you’ve decided that investing in real estate as a retirement plan is something you ought to do. How should you go about it?
Well, to do so efficiently, there are specific steps that you need to take. Namely, your goal here is to take your time and make the right investment at the right time.
You are not looking for a place to retire in, nor should you feel any pressure to purchase a piece of land as soon as possible. Your goal is to make your money’s worth.
Doing Your Homework
It’s a time-honored tradition that the more research you do, the better off you’ll be in the real estate market. From past mistakes that people have made while investing to clever decisions that brought them millions, you need to read about them all.
To understand the real estate market, you need to know how it functions and the most critical aspect that helps guide it. Of course, no prediction can foretell the future, and there is simply no way to be 100% sure that your investment will pay off.
But, the more research you do, the better the odds will be that you’ll make a sound, well-timed investment.
Unfortunately, no algorithm can tell you whether your investment will pay off. The real estate market is influenced by many factors like technology, politics, and cultural trends. Therefore, it cannot be boiled down to a single algorithm.
Instead, the goal of your investigation should be to gain intuition. This is best done by examining real estate offers and seeing how their value changes. A good market sense is your best tool if you plan to use real estate as a retirement investment.
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Author bio: Kelvin Whittaker has worked as a real estate agent for over 25 years. Now, he focuses on providing online consultations for private parties and professional companies like Number 1 Movers. When it comes to commercial and residential real estate, there is hardly a person that is as educated as Kelvin.